FX.co ★ Pound Strengthens to Highest Since October

The British pound surged to approximately $1.33, marking its highest point since late October. This rise comes as a result of investor optimism following an upward revision of the UK services PMI for November, coupled with a weakening US dollar ahead of a likely Federal Reserve rate cut expected next week. The services PMI adjustment brought it to 51.3, up from an initial 50.5, thus comfortably surpassing the 50 mark that differentiates expansion from contraction. Additionally, the composite PMI increased to 51.2 from 50.5. Despite these encouraging top-line figures, S&P Global reported a slowdown in business activity and the steepest drop in employment since February. However, inflation in prices charged fell to its lowest since January 2021. Looking forward, the Bank of England is anticipated to implement a 25-basis-point rate cut in December, after which it is likely to pause due to concerns about a potential resurgence in inflation. In the US, markets have fully priced in a third Fed rate reduction in December, with expectations for at least two further cuts next year, contributing to the pound's relative strength.