Sterling rises as Bank of England officials signal inflation concerns despite contracting PMI and consumer confidence data.
The British pound held firm on Thursday despite dismal UK economic indicators, as the Bank of England (BoE) maintained a hawkish stance. Flash Purchasing Managers Index (PMI) data showed the composite reading dropping into the high 40s, below forecasts of above 51, with services contracting and manufacturing the sole bright spot. Consumer confidence also slid further, deepening economic gloom.
The BoE’s Monetary Policy Committee (MPC) member remarks leaned toward tightening, clashing with weak survey data signaling a potential slowdown. Governor Bailey’s comments did little to shift sentiment, leaving markets torn between inflation risks and recession warnings. The pound’s resilience stemmed partly from a weaker US dollar amid risk-on sentiment.
Sterling’s gains were modest, reflecting uncertainty over whether to trust the BoE’s rhetoric or deteriorating economic readings. External factors, including a brief US-Iran ceasefire rumor, temporarily lifted risk appetite and supported the currency.