In the European session today, the British Pound to US Dollar (GBP/USD) exchange rate remained largely unchanged around 1.2950. This stability followed the publication of mixed Purchasing Managers’ Index (PMI) figures out of the United Kingdom. The GBP/USD cross advanced by 0.25%, remaining in the green on the day. This increase is a testament to its strength after such a quick three-day bearish rally. That positive move gained headway from a positive surprise in March’s UK private sector business activity.
According to new data from the UK, the Preliminary Services Business Activity Index surged to 53.2 in March. Notably, this is up from February’s reading of 51. This figure beat the market expectations of 51.2, giving the Pound Sterling a significant lift. Despite that positive outlook, the Manufacturing PMI fell unexpectedly in a March surprise. It fell to 44.6, down from 46.9 in February, which was actually below the already-expected forecast of 47.3.
Mixed UK PMI Data
The mixed PMI data was a key factor in determining the direction of the GBP/USD pair today. Even though the services sector continued to grow strongly, the manufacturing sector struggled, accounting for the PMI numbers. The jump in the services PMI points to business activity picking up. This would seem to imply that the services sector is growing increasingly powerful as an economic driver.
The decline in manufacturing PMI indicates that sector is shrinking. Beyond these issues, there are reasonable questions about how this will impact long-run economic growth. The key services sector had performed positively and provided strong support for the Pound. Consequently, the Pound USD exchange rate remained relatively stable.
GBP/USD Market Performance
Now that the European session has matured on Monday, the GBP/USD currency pair is trading with a positive trend, shrugging off its prior downtrend. The two remained buoyant under 1.2950. This is a positive sign for investor confidence in the resilience of the UK economy, notwithstanding an array of mixed data releases. The currency pair's performance was further bolstered by the surprising uptick in services PMI, which offset concerns stemming from the manufacturing sector's underperformance.
Traders closely monitored volatility in the UK economy and global market movements, creating most of the volatility in the UK sterling traders traded. Investor optimism about the UK’s economic outlook increased after GBP/USD soared. This surge was powered by a robust services PMI index print.
Implications for Pound Sterling
The better-than-expected services PMI is bullish for Pound Sterling, further supporting the currency against its major counterparts. This pick-up in growth in services sector business activity is a sign of UK economic recession resilience and growth upside. For this reason investors are still likely to take a positive view of Pound Sterling, especially if data goes on to show continued economic growth.
Ongoing global economic uncertainties, Remington said, are the real wild card. Furthermore, black swan risks inside the manufacturing sector itself may loom large to affect performance going forward. Market participants will closely monitor upcoming economic indicators and geopolitical developments to assess their influence on GBP/USD and broader currency markets.