Pound Sterling Higher Against Euro, Dollar on PMI Growth Signal

Modified: Thursday, 21 August 2025 12:41 BST - Written by Frank Davies

STORY LINK Pound Sterling Higher Against Euro, Dollar on PMI Growth Signal

The British Pound edged higher on Friday after survey data pointed to stronger momentum in the UK economy, with the composite PMI climbing to its highest level in a year. The S&P Global/CIPS flash survey showed services driving the recovery, even as manufacturing continued to struggle.

The pound to euro exchange rate (GBP/EUR) rose 0.06% to 1.1564, while the pound to dollar exchange rate (GBP/USD) gained 0.12% to 1.3481. Sterling also advanced against the Swiss franc (+0.25% to CHF1.0855), Canadian dollar (+0.13% to C$1.8707), Australian dollar (+0.26% to A$2.0977) and New Zealand dollar (+0.11% to NZ$2.3130). Gains were firmer against the yen (+0.35% to ¥199.04), while smaller moves were seen versus the Swedish krona (+0.05%), South African rand (+0.14%), Israeli shekel (+0.18%) and Singapore dollar (+0.22%). The pound slipped 0.45% against the Norwegian krone.

Pantheon Macroeconomics noted the August PMI signalled growth broadly in line with the Bank of England’s expectations for the third quarter.

"Growth will match the MPC’s expectations in Q3."

The composite index rose to 53.0, its highest since August 2024, driven by a rebound in services activity.

"The S&P Global/CIPS composite PMI rose to 53.0 in August from 51.5 in July, above the consensus of 51.6."

Pantheon highlighted that the data were consistent with quarterly GDP growth of 0.2%–0.3%, matching the Bank’s 0.3% projection.


"The composite PMI for August in isolation is consistent with quarter-to-quarter growth of between 0.2% and 0.3% in Q3. The average estimate from our suite of models is 0.3%, in line with the MPC’s forecast of 0.3%."

Forward-looking components also pointed to rising optimism, with new orders and future output expectations improving.

"The composite PMI’s future output balance rose to 67.5 in August, from 66.7, once we seasonally adjust the data, and the new orders balance climbed to 52.3, from 47.7, only the second time in nine months it has been above 50."

Employment remained weak, though Pantheon argued the survey might be too downbeat given recent GDP data.

"The PMI’s employment balance rose to 46.4, from 45.3 in July. The fact that the balance sits below 50 represents a downside risk to employment. Still, we think the weight of evidence points to the jobs market recovering after the shock of the payrolls tax hike in April."

On prices, the survey showed only a modest increase in cost pressures, suggesting underlying services inflation is easing.

"The services output price balance ticked up to 55.0, from 54.6 in July, consistent with the MPC’s preferred measure of underlying services inflation slowing to around 3.5%."


Pantheon concluded that the PMI reinforces the view that the UK economy is running at a “healthy pace” and reduces the case for additional policy easing.

"The bigger picture from the MPC’s perspective is that the dataflow since the August cut has been decisively hawkish, weakening the justification for reducing rates at that meeting. We think healthy growth and inflation miles above target means the MPC will have to keep rates on hold for the rest of the year."

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TAGS: Pound Dollar Forecasts Pound Euro Forecasts