Why is the British Pound pulling back from two-week highs despite upbeat UK manufacturing activity?

After stalling just short of 1.3450, GBP/USD is testing former highs near 1.3430 as support.
October brought the fastest expansion in UK manufacturing in five months, the UK S&P Global Manufacturing PMI confirmed.
Attention remains firmly on the US midterm elections as the US Dollar faces modest selling pressure.

Modest gains in the British Pound (GBP) against the US Dollar (USD) persist on Monday, although the currency has retreated from the two-week highs reached earlier in the session. Confirmation of robust UK manufacturing activity in October has not prevented the pullback. At the time of writing, GBP/USD is probing former highs around 1.3420 for support, having slipped from session peaks a few pips below 1.3450.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Confirmation of the preliminary UK S&P Manufacturing Purchasing Managers' Index (PMI) figures came earlier in the day with the final release. The October reading rose to 52.8 from September’s 51.9, marking the strongest pace of expansion in the sector in five months.

A quarter-point increase in the Bank of England’s Bank rate to 4.0% following Thursday’s monetary policy meeting remains the hope supported by these figures. The outlook beyond that meeting is less clear: the bank’s committee remains divided over additional monetary tightening, while Governor Bailey has tended to downplay inflationary pressures in recent months.

Could US midterm election risks modestly weigh on the Dollar?

A mild improvement in risk appetite, prompted by lower Oil prices, is keeping the US Dollar under modest selling pressure on Monday, despite a recovery from session lows. Uncertainty surrounding the US election outcome is also presenting a significant headwind.

The latest Polymarket odds point to “high expectations that the Republicans will lose control of Congress, and the Democrats could even take both the House and Senate.” That is the assessment of analysts at MUFG/BTMU. Their experts add that “losing control of the House and Senate would effectively leave President Trump as a lame duck,” while a “damaging defeat for the Republicans could put a dampener on US Dollar strength,” though they qualify this by saying “we don’t expect it to be a game changer on its own.”

Ahead of the elections, attention turns to the US ISM Manufacturing PMI, scheduled for release later on Monday. Expectations are for a modest acceleration in business activity in October and an easing in the prices subindex, albeit from elevated levels. Such figures reinforce the case for robust US economic growth and are likely to limit the US Dollar’s downside.

Which economic indicator is in focus?

S&P Global Manufacturing PMI

A monthly release from S&P Global, the Manufacturing Purchasing Managers Index (PMI) provides a leading measure of business activity across UK manufacturing. Surveys of senior executives at private-sector companies form the basis of the figures. Respondents report whether conditions have changed in the current month relative to the preceding month. Their answers can foreshadow shifts in official data series, including Gross Domestic Product (GDP), industrial production, employment and inflation. On the index’s 0 to 100 scale, 50.0 denotes unchanged conditions from the previous month. Readings above 50 suggest that manufacturing activity is generally expanding, a positive signal for the Pound Sterling (GBP). By contrast, readings below 50 point to a broad decline in activity among goods producers and are regarded as negative for GBP.

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Latest release: Mon 02 Nov 2026 09:30

Release frequency: Monthly

Reported figure: 52.8

Market consensus: 52.8

Prior reading: 52.8

Data source: S&P Global

Economic Gauge

What Does the ISM Manufacturing PMI Measure?

For the US Dollar (USD), an ISM Manufacturing Purchasing Managers Index (PMI) reading above 50 is a bullish signal, indicating that the manufacturing economy is broadly expanding. Conversely, a reading below 50 points to a general decline in factory activity and is viewed as bearish for USD. Published monthly by the Institute for Supply Management (ISM), the index serves as a leading gauge of business activity across the US manufacturing sector. It draws on a survey of manufacturing supply executives, who respond using information gathered within their respective organisations. Their responses indicate whether activity in the current month has changed compared with the previous month.

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Upcoming release: Mon 02 Nov 2026 15:00

Release frequency: Monthly

Consensus estimate: 54.6

Previous reading: 54.5

Data source: Institute for Supply Management

Why Do Traders Track This Release?

The USD typically benefits when the Institute for Supply Management’s (ISM) Manufacturing Purchasing Managers Index (PMI) exceeds expectations. The index offers a dependable assessment of conditions in the US manufacturing sector: readings above 50 indicate that business activity expanded over the survey period, while those below 50 point to contraction. As leading indicators, PMIs may flag a turning point in the economic cycle. Alongside the headline PMI, traders closely monitor the Employment Index and the Prices Paid Index for insights into labour market conditions and inflation.