Pound Surges as UK Business Activity Hits Nine-Month High

The pound gained against the dollar and held steady against the euro on Thursday, as a survey of UK business activity showed strong growth in the service sector and a rise in inflationary pressures.

According to the S&P Global/CIPS Composite Purchasing Managers’ Index (PMI), which measures the performance of both services and manufacturing firms, the UK economy expanded at its fastest pace in nine months in February.

The PMI rose to 53.3, up from 52.9 in January, and above the 50 mark that separates growth from contraction. Economists had expected no change from the previous month.

The survey also revealed that the cost of inputs increased at the highest rate since August 2023, mainly due to higher wages in the service sector, according to Reuters. This could mean that the Bank of England (BoE) will keep interest rates unchanged for longer as it monitors the inflation outlook.

Nomura analysts said that they were more confident in their prediction of an August rate cut by the BoE after seeing the data. They added that the BoE’s less dovish stance, compared to the US Federal Reserve and the European Central Bank, which are expected to cut rates in June, would help the pound remain resilient in the global currency market.

Pound Returns to February 2-High

The pound rose as high as $1.2709 on Thursday, its strongest level since Feb 2, when the dollar soared on the back of upbeat US jobs data. The pound later pared some gains and was last up 0.16% at $1.2657. Against the euro, the pound was relatively flat at 85.5 pence.

The exchange rate between the pound and other currencies is influenced by many factors, including interest rate differentials, economic growth, political uncertainty, and market sentiment.

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