Why is the British Pound lagging despite an upbeat UK flash PMI report?

• Selling pressure weighs on the British Pound despite an upside surprise in the UK's October flash S&P Global PMI readings.
• At 53.1, the UK S&P Global Composite PMI exceeds the forecast of 51.8.
• A November interest rate increase by the BoE is widely anticipated.

Under pressure against its major currency peers on Friday, the British Pound (GBP) trades around 1.3380 against the US Dollar (USD), down 0.1% during the European session. Sterling remains on the back foot despite surprisingly strong October flash readings for the United Kingdom (UK) S&P Global Purchasing Managers’ Index (PMI).

Strong output growth across manufacturing and services kept overall business activity robust, according to the PMI report. Against expectations of a decline to 51.8, the Composite PMI reached 53.1, well above September's final reading of 52.0.

“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.

Retail Sales figures released earlier in the day had fallen short of UK forecasts. September sales fell 0.4% Month-on-Month (MoM), the Office for National Statistics (ONS) reported, compared with expectations of a more modest 0.1% decline.

An interest rate increase at the November policy meeting appears almost certain for the Bank of England (BoE).

Will upside surprises in UK inflation and wages prompt a more hawkish BoE?

A “brace of upside surprises for CPI and PPI output price inflation, and firmer wage data” is behind Societe Generale strategists' view that a BoE rate hike is effectively “nailed on in November,”. In their assessment, 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.

Heading into the weekend, the US Dollar is recovering after ending a four-day run of losses. Market participants are closely watching for October's preliminary United States (US) S&P Global PMI readings, due at 13:45 GMT.

GBP/USD Technical Analysis: Can the Recovery Continue?

A mildly bullish near-term outlook remains in place on the daily chart, where GBP/USD trades at 1.3381, above its 20-period exponential moving average (EMA) of 1.3319. The pair is extending its rebound from recent lows. At 56, the Relative Strength Index (RSI) remains positive but below overbought territory, pointing to sustained upward momentum rather than a rally running out of steam.

The current pivot zone near 1.3381 offers immediate downside support, followed by more substantial demand at the 20-period EMA of 1.3319. Holding that moving average would preserve the broader recovery structure. The dataset shows no nearby technical resistance, suggesting the pair would likely keep testing higher levels while support remains intact. A sustained move back below 1.3319, however, would signal that bullish pressure may be weakening.

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