GBP Faces Pullback Amid US Yield Rebound but Remains Buoyant on Strong UK PMI Data

GBP has slightly retreated from its over 1-year highs against the USD following a rebound in US yields, spurred by robust PMI figures. Despite this pullback, GBP/USD managed to extend beyond $1.31, supported by better-than-expected UK PMI data, which indicates continued economic recovery in Britain.

Preliminary August services data rose to 53.3, surpassing the 52.8 forecast, marking the tenth consecutive month of growth. The manufacturing sector also showed expansion at 52.5, beating estimates and suggesting a more balanced recovery. Further analysis of the surveys revealed rising business activity and resilient demand, leading to the fastest employment growth since June 2023. Additionally, inflationary pressures eased across the private sector, with input costs increasing at the slowest rate since January 2021. This could give the Bank of England more confidence to consider another interest rate cut in November, although a September cut appears unlikely, while markets are anticipating rate cuts from both the Fed and ECB. This has bolstered demand for GBP

Powell's Upcoming Jackson Hole Speech Could Shape Market Expectations and Dollar Trends

Fed Chairman Jerome Powell is set to speak at the Jackson Hole Economic Symposium today, where he will provide insights into the central bank's potential response to growing indications of a moderating job market. This speech could be a crucial moment for market participants, influencing whether the current expectations of easing are warranted and determining the future direction of the dollar's downtrend.  A less-dovish speech by Powell today, which could strengthen the dollar and temper the risk rally.