British Pound lags despite encouraging UK flash PMI data

• October’s UK flash S&P Global PMI readings beat expectations, but the British pound retreats.
• The UK S&P Global Composite PMI reaches 53.1, exceeding the 51.8 forecast.
• A November interest rate rise from the BoE is widely anticipated.

A 0.1% fall leaves the British pound (GBP) trading at around 1.3380 against the US dollar (USD) in Friday’s European session, with sterling also lower against its major currency peers. Pressure on the pound persists despite unexpectedly strong October flash readings for the United Kingdom (UK) S&P Global Purchasing Managers’ Index (PMI).

At 53.1, the Composite PMI was well above September’s final reading of 52.0, defying forecasts for a decline to 51.8. Substantial increases in both manufacturing and services output kept overall business activity robust, according to the PMI report.

“The UK economy has picked up momentum in October, with early PMI data indicating the strongest rate of growth since February. This encouraging sign of economic resilience is underscored by firms taking on additional workers for the first time since hiring was hit by the 2024 Autumn Budget,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

September’s UK retail sales figures, released earlier in the day by the Office for National Statistics (ONS), fell short of expectations. Sales dropped 0.4% month-on-month (MoM), compared with the more modest 0.1% contraction forecast.

As for monetary policy, an interest rate increase at the Bank of England’s (BoE) November meeting appears almost certain.

BoE expected to adopt a more hawkish stance after upside surprises in UK inflation and wages

Citing a “brace of upside surprises for CPI and PPI output price inflation, and firmer wage data”, Societe Generale strategists describe a BoE rate rise as effectively “nailed on in November,”. In their view, these developments will “alert the MPC to the budding risk of second round effects” and “will almost certainly trigger a hawkish response on interest rates” when policymakers meet in two weeks.

After four consecutive days of losses, the US dollar is recovering ahead of the weekend. Market attention is firmly on October’s preliminary United States (US) S&P Global PMI figures, due at 13:45 GMT.

GBP/USD Holds Above Its 20-Period EMA

With GBP/USD at 1.3381 on the daily chart, the pair remains above its 20-period exponential moving average (EMA) of 1.3319. That positioning supports a slightly bullish short-term outlook as the recovery from recent lows extends. A Relative Strength Index (RSI) reading of 56 indicates positive momentum without overbought conditions, pointing to steady gains rather than a rally running out of steam.

The current pivot zone around 1.3381 provides initial downside support. Below that, the 20-period EMA at 1.3319 marks a stronger area of demand and, while intact, supports the wider recovery pattern. As the dataset contains no nearby technical resistance levels, further attempts to push higher would be likely while these supports hold. A sustained move back below 1.3319, however, would suggest that bullish pressure is weakening.

(The technical analysis of this story was written with the help of an AI tool. Know more.)