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Where Is the GBP Headed After UK Services Jump?

The GBP (British Pound) has been one of the strongest currencies since Q3 of 2024, with the Bank of England keeping the sentiment for the GBP optimistic, despite the economic weakness. However, we have seen some positive signals, as services and manufacturing PMI indicators have resurfaced above 50 points, which means that both sectors have come out of contraction and are now expanding.

Financial services account for a large portion of UK income

In the FOMC Meeting Minutes yesterday, the majority of participants emphasized the risks associated with implementing monetary policy easing prematurely. This suggests a cautious approach to adjusting policy rates but GBP/USD ended the day slightly higher nonetheless.

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Besides that, comments from the BoE member Swati Dhingra were dovish, but the GBP ignored them. He stated that postponing interest rate reductions can have negative effects on the economy, which implies that delaying rate cuts may lead to adverse living standards, particularly in terms of household welfare and affordability.

However, today we had the services and manufacturing PMI reports from the UK and later the UK counterparts will be released. The numbers from Britain were

UK Services and Manufacturing Reports for January

  • Services PMI:
    • February’s flash services PMI came in at 54.3, slightly above the expected 54.1.
    • This figure remains unchanged from the previous month’s reading of 54.3, indicating ongoing expansion in the services sector.
  • Manufacturing PMI:
    • The Manufacturing PMI for January was reported at 47.1, below the expected 47.5.
    • While slightly lower than anticipated, this reading is a slight improvement from the previous month’s figure of 47.0.
  • Composite PMI:
    • The Composite PMI, which combines both the services and manufacturing sectors, was reported at 53.3 for January.
    • This figure exceeded expectations, as it came in higher than the anticipated 52.9.
    • It also reflects an increase from the previous month’s Composite PMI of 52.9, indicating overall growth across both sectors.
  • GBP/USD Live Chart

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    Skerdian Meta
    Lead Analyst
    Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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