The British pound has experienced a positive trend, gaining strength against the US dollar and reaching its highest level since late October. This movement is influenced by revised UK service sector data and expectations of monetary policy decisions from both the Bank of England and the Federal Reserve. While economic activity faces some challenges, the pound benefits from a perceived advantage relative to the US dollar.
- The British pound extended gains toward $1.33.
- It reached its strongest level since late October.
- November’s UK services PMI was revised up to 51.3 from 50.5.
- The composite PMI rose to 51.2 from 50.5.
- Business activity slowed, and employment fell at the fastest pace since February.
- Prices charged inflation eased to its lowest level since January 2021.
- The Bank of England is widely expected to deliver a 25-basis-point rate cut in December.
- US markets fully price in a third Fed rate cut in December, with at least two more reductions anticipated next year.
The prevailing economic narrative suggests a mixed environment for the British economy. While certain sectors demonstrate expansion, reflected in improving PMI figures, underlying concerns remain about slowing business activity and declining employment. Expected monetary policy adjustments from both the Bank of England and the Federal Reserve are contributing to the pound’s relative strength, particularly as the US dollar weakens in anticipation of rate cuts. The convergence of these factors paints a picture of an asset benefiting from both domestic improvements and international monetary policy dynamics.