Pound Sterling Forecast: Revised Services PMI Fails to Lift GBP/USD

Modified: Wednesday, 3 June 2026 20:01 BST - Written by David Woodsmith

STORY LINK Pound Sterling Forecast: Revised Services PMI Fails to Lift GBP/USD

The Pound US Dollar (GBP/USD) exchange rate slipped on Wednesday as ongoing unrest in the Middle East continued to weigh on market sentiment.

At the time of writing, GBP/USD was trading at around $1.3451, down slightly from the start of Wednesday’s session.

The US Dollar (USD) strengthened through the middle of the week as investors gravitated towards safer assets amid renewed uncertainty surrounding the conflict between the US and Iran.

Market sentiment deteriorated after reports suggested fresh military exchanges in the Gulf had undermined confidence in ongoing diplomatic efforts, prompting fears that tensions could intensify further.

Investors remain particularly concerned about the potential impact on global trade and energy supplies if disruption in the Strait of Hormuz continues. These concerns were amplified after the Organisation for Economic Co-operation and Development (OECD) warned that prolonged instability could significantly weaken global growth prospects over the coming years.

The ‘Greenback’ also drew support ahead of the latest ISM services PMI release, with economists forecasting an improvement in activity across the US service sector during May.

Although Sterling (GBP) weakened against the US Dollar, it performed more positively against several other major currencies after revised UK survey data exceeded expectations.

The final reading of May’s services PMI was revised up from 47.9 to 49.3. While the index remained below the 50-point mark associated with growth, the revision suggested conditions were not as weak as initially feared.

The report nevertheless highlighted the challenges facing the UK economy, with rising energy costs and uncertainty linked to events in the Middle East continuing to weigh on both businesses and consumers.

As a result, while the data offered some reassurance to GBP investors, it was not enough to generate significant support for Sterling.

Near-Term GBP/USD Forecast: Payroll Caution to Limit Market Moves?

Looking ahead, developments in the Middle East are likely to remain a key driver of movement in the Pound to US Dollar (GBP/USD) exchange rate.

Any further escalation in tensions could reinforce demand for the US Dollar's safe-haven appeal, although gains may be limited as investors remain cautious ahead of Friday’s closely watched non-farm payrolls report.

For Sterling, attention may turn to remarks from the Bank of England (BoE) Governor Andrew Bailey.

Should Bailey signal that policymakers remain concerned about the outlook for growth and are prepared to take a measured approach to future interest rate decisions, the Pound could face additional pressure heading into the end of the week.

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TAGS: Pound Dollar Forecasts