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Euro rallies against a weak British Pound as UK business activity disappoints

September 23, 2026

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EUR/GBP accelerates its recovery and nears 0.8600 amid broad-based Pound’s weakness.
UK business activity slowed in September amid higher inflationary pressures.
In the Eurozone, Services activity improved beyond expectations while the manufacturing sector grew at a steady pace.

The Euro (EUR) accelerates its recovery against the British Pound (GBP) on Wednesday as mixed UK Purchasing Managers’ Index (PMI) figures reveal that inflationary pressures have weighed heavily on business activity in September. The EUR/GBP pair hit session highs at 0.8590, drawing closer to the top of the monthly range, at the 0.8600 area.

Preliminary UK S&P Global Purchasing Managers’ Index (PMI) data showed that manufacturing activity improved to 52.0 in September from 51.7 in August, against expectations of a mild slowdown to 51.6. Services activity, on the other hand, slowed down to 51.7, from 52.5 in the previous month, below the 52.0 market consensus. This has pushed the Composite Index down to 51.7 in September, from 52.5 in the previous month.

The report highlights that the rate of input price inflation accelerated for the second month running to its highest since June, and underscores survey respondents’ complaints about increased energy, fuel and raw material costs.

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, affirmed that “September is seeing a worrying combination of disappointingly sluggish economic growth and intensifying inflationary pressures, with subdued business confidence and high costs meanwhile continuing to discourage hiring.”

Eurozone PMIs beat expectations in September

Eurozone data, on the other hand, has been more supportive. The Preliminary Eurozone Services PMI improved to 53.0, its highest level in 10 months, beating expectations of a 51.7 reading, while Manufacturing PMI remained steady at 52.7, in line with the market consensus.

In Germany, the services sector’s activity improved to 52.9 after five months of contraction, also beating expectations of a 50.0 reading. Manufacturing activity, on the other hand, slowed down to 53.8, from 54.3, although still at levels consistent with solid business activity.

The Euro, however, is facing pressure from growing uncertainty in Germany, following the disastrous results of the ruling CDU party in state elections this week, which have put Chancellor Frederich Merz’s leadership into question. Beyond that, France’s public debt has reached its highest levels since 1978 and is expected to keep growing in the coming months amid the spiralling borrowing costs, which threaten to unleash a credit crisis.