PMI Boosts Pound Sterling Against Euro And Dollar

The British Pound advanced against the Euro, Dollar and other major currencies after the UK’s PMI survey for November revealed the economy performed better than was expected.

The services PMI rose from 49.5 to 50.5, when economists expected it to remain unchanged, ensuring the UK’s largest sector returned to growth in November.

The manufacturing PMI rose to 46.7 from 44.8 and exceeded consensus estimates of 45. The composite PMI, which adjusts for the broader economy, rose to 50.1 from 48.7, beating a consensus estimate of 48.7.

This represents a solid upside surprise in a much-watched monthly data series, and the Pound has responded by advancing: The Pound to Euro exchange rate gapped higher from 1.1465 to 1.1495 in the wake of the numbers, the Pound to Dollar exchange rate rose 0.30% in the five-minute interval following the release to quote at 1.2544.

S&P Global, who conducted the survey, said there were renewed signs of sticky inflation in November as both input costs and average prices charged increased at faster rates than in October.

The findings will worry the Bank of England, which has shown concern over recent weeks that markets have grown too complacent in believing the fight against inflation.

This is reflected in the ‘pricing out’ of expectations for further rate hikes in money markets and a commensurate ‘pricing in’ of rate cuts.

At one point last week, as many as 80 basis points of rate cuts were expected in 2024, with a first cut increasingly being expected as early as May.

This has weighed on the Pound over recent weeks, despite protestations by Bank of England Governor Andrew Bailey and other Bank of England’s Monetary Policy Committee members.

This robust data and warnings of inflation persistence will lend Bailey a hand and push back on rate cut bets.

If this is the case, the Pound can advance further.