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The Pound Sterling (GBP) attracts bids against its major peers on Thursday after the release of the upbeat preliminary United Kingdom (UK) S&P Global Purchasing Managers’ Index (PMI) data for August. The report showed that the Composite PMI rose at a faster pace to 53.0, compared to expectations of 51.6 and the prior reading of 51.5.

The Composite PMI grew firmly due to a strong demand in the service sector activity. The Services PMI came in at 53.6, higher than estimates and the prior release of 51.8.

Meanwhile, the Manufacturing PMI surprisingly came in lower at 47.3, while economists expected the data to have increased to 48.3 against the former reading of 48.0. This indicates that the manufacturing sector activity contracted at a faster pace. A figure below the 50.0 threshold is considered as contraction in economic activities.

“The flash UK PMI survey for August indicated that the pace of economic growth has continued to accelerate over the summer after a sluggish spring, the rate of expansion now at a one-year high. The services sector has led the expansion, but manufacturing also showed further signs of stabilising," Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said.

On the monetary policy front, Bank of England (BoE) officials are expected to be reluctant to cut interest rates in the remainder of the year as the UK inflation is proving to be persistent. The Office for National Statistics (ONS) reported on Wednesday that price pressures grew at a faster-than-expected pace in July. The headline Consumer Price Index (CPI) came in at 3.8% on year, the highest level seen in almost 18 months. The core CPI – which excludes volatile items such as food, energy, alcohol and tobacco – also grew at an annual pace of 3.8%.

Earlier this month, the BoE reduced interest rates by 25 basis points (bps) to 4%, with a narrow majority, and guided a “gradual and careful” monetary easing approach.

Daily digest market movers: Pound Sterling rises against US Dollar, Fed Powell's speech eyed

• The Pound Sterling edges higher to near 1.3450 against the US Dollar (USD) on Thursday. The GBP/USD pair ticks up after upbeat UK PMI data. While, the US Dollar trades broadly stable as investors await the Federal Reserve (Fed) Chair Jerome Powell’s speech at the Jackson Hole (JH) Symposium on Friday.
• At the time of writing, the US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, is rising close to the weekly high near 98.45.
• Market experts believe that gains in the US Dollar are driven by hopes that Fed Chair Powell will argue in favor of holding interest rates at their current levels. "Given the relatively high bar for Powell to meet, there’s a bit of risk being baked into the markets that he leans to the hawkish side and the proverbial rug gets pulled from beneath investors," analysts at Capital.com said, Reuters reported.
• The Federal Open Market Committee (FOMC) minutes of the July monetary policy meeting showed on Wednesday that a majority of members, including Jerome Powell, argued in favor of a restrictive monetary policy stance as they need time to have more clarity on the “magnitude and persistence of higher tariffs’ effects on inflation”.
• According to the CME FedWatch tool, there is an almost 81.6% chance that the Fed will cut interest rates by 25 bps to the 4.00%-4.25% range in the September meeting.
• Meanwhile, US President Donald Trump has attacked the Fed’s independence again by calling Fed Governor Lisa Cook to resign after citing allegations made by one of his political allies about mortgages Cook holds in Michigan and Georgia. In response, Cook has stated that she is “gathering accurate information to provide facts”, and “has no intention of being pressured to step down”.
• In Thursday’s session, investors will focus on the preliminary US S&P Global PMI report for August, which will be published at 13:45 GMT. Economists expect the Composite PMI to have expanded moderately.

Technical Analysis: Pound Sterling struggles around 20-day EMA

(Click on image to enlarge)

The Pound Sterling rises marginally higher against the US Dollar on Thursday. However, the near-term trend of the GBP/USD pair is uncertain as it hovers around 20-day Exponential Moving Average (EMA) at 1.3460.

The 14-day Relative Strength Index (RSI) drops to near 50.00. indicating a lack of momentum.

Looking down, the August 11 low of 1.3400 will act as a key support zone. On the upside, the July 1 high near 1.3790 will act as a key barrier.

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