UK S&P Global Composite PMI declines to 51 in September vs. 52.7 expected
Economic activity in the UK's private sector expanded at a softer pace in September than in August, with the S&P Global Composite Purchasing Managers' Index (PMI) declining to 51 from 53.5. This reading came in worse than the market expectation of 52.7.
In this period, the Manufacturing PMI fell to 46.2 from 47, while the Services PMI edged lower to 51.9 from 54.2.
Commenting on the survey's findings, "September’s flash UK PMI survey brought a litany of worrying news including weakening growth, slumping overseas trade, worsening business confidence and further steep job losses," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
Market reaction to UK PMI data
GBP/USD struggles to gain traction following the PMI data and trades marginally lower on the day, at around 1.3500.
Pound Sterling Price Today
The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the Swiss Franc.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.07% | 0.04% | -0.04% | 0.14% | 0.02% | 0.10% | -0.10% | |
| EUR | -0.07% | 0.10% | -0.10% | 0.15% | 0.02% | 0.09% | -0.11% | |
| GBP | -0.04% | -0.10% | -0.12% | 0.03% | -0.07% | -0.01% | -0.21% | |
| JPY | 0.04% | 0.10% | 0.12% | 0.17% | 0.09% | 0.14% | 0.02% | |
| CAD | -0.14% | -0.15% | -0.03% | -0.17% | -0.12% | -0.04% | -0.25% | |
| AUD | -0.02% | -0.02% | 0.07% | -0.09% | 0.12% | 0.06% | -0.06% | |
| NZD | -0.10% | -0.09% | 0.01% | -0.14% | 0.04% | -0.06% | -0.20% | |
| CHF | 0.10% | 0.11% | 0.21% | -0.02% | 0.25% | 0.06% | 0.20% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).
This section below was published as a preview of the UK Purchasing Managers' Index (PMI) data at 06:00 GMT.
The UK services PMI overview
The UK economy will release its September Services PMI later in the European session at 0830GMT, which is expected to come in at 53.5, down from 54.2 recorded in the previous month.
How could it affect GBP/USD?
Ahead of the key data, the GBP/USD pair holds above the 1.3500 psychological mark, though it seems to struggle to capitalize on the previous day's goodish rebound from the vicinity of mid-1.3400s, or an over two-week low. A stronger UK Services PMI print could provide a modest lift to the British Pound (GBP), though the immediate market reaction is more likely to be limited amid the emergence of some US Dollar (USD) dip-buying.
Conversely, a weaker print might prompt fresh selling around the GBP/USD pair against the backdrop of the Bank of England's (BoE) dovish outlook. This, in turn, suggests that the path of least resistance for spot prices is to the downside, and any attempted positive move could be seen as a selling opportunity.
Pound Sterling FAQs
The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as ‘Cable’, which accounts for 11% of FX, GBP/JPY, or the ‘Dragon’ as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).
The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of “price stability” – a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.
Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.
Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
