British Pound lags despite strong UK flash PMI data

• Sterling retreats despite an unexpectedly strong October flash UK S&P Global PMI reading.
• 53.1: UK S&P Global Composite PMI beats the 51.8 forecast.
• A November interest rate rise by the BoE is widely anticipated.

A 0.1% fall leaves the British Pound (GBP) near 1.3380 against the US Dollar (USD) in Friday’s European session. Sterling is also lower against its other major currency peers. Selling pressure persists despite unexpectedly strong October flash Purchasing Managers’ Index (PMI) figures for the United Kingdom (UK) from S&P Global.

At 53.1, the Composite PMI substantially exceeded September’s final reading of 52.0, defying forecasts for a decline to 51.8. Significant output growth across manufacturing and services kept overall business activity robust, according to the 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.

Retail Sales figures released earlier in the day undershot projections. September sales fell 0.4% Month-on-Month (MoM), the Office for National Statistics (ONS) reported. A decline had been forecast, but at a smaller 0.1%.

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

UK inflation and wage surprises point to a more hawkish BoE

A rate rise by the BoE is effectively “nailed on in November,” according to strategists at Societe Generale. They cite a “brace of upside surprises for CPI and PPI output price inflation, and firmer wage data” as the principal drivers. 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” at the next policy meeting in two weeks.

Heading into the weekend, the US Dollar is recovering, ending a four-day run of losses. Market attention is firmly on October’s preliminary United States (US) S&P Global PMI figures, due at 13:45 GMT.

GBP/USD: Technical Outlook

At 1.3381 on the daily chart, GBP/USD remains above its 20-period exponential moving average (EMA) of 1.3319. That positioning supports a mildly 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 an exhausted advance.

The current pivot zone near 1.3381 provides immediate downside support. Below it, the 20-period EMA at 1.3319 marks a stronger area of underlying demand. Holding that average would preserve the broader recovery structure. As the dataset contains no nearby technical resistance levels, further attempts to move higher look likely while support holds. However, a sustained drop below 1.3319 would suggest bullish pressure is weakening.

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