Sterling's turn to feel the PMI heat

<p>Cable is now down to fresh lows on the day at 1.2675 after having fallen initially from around 1.2750 to 1.2725 after the poor euro area PMI readings, and then now from there after the less worse but still bad UK PMI readings <a href="https://www.forexlive.com/news/uk-august-flash-services-pmi-487-vs-510-expected-20230823/" target="_blank" rel="follow">here</a>.</p><p>If anything else, this just gives the BOE some more things to think about moving forward. As opposed to the case of ECB pricing, the BOE pricing here should not be too impacted. A 25 bps rate hike for September should hold comfortably but beyond that, there will be questions on where the peak rates will be as the economy starts to suffer more than it already has.</p><p>The peak pricing for BOE rates is now seen at 5.80%, much lower than the 5.94% level seen last week after the UK inflation numbers.</p><p>The good news for the BOE I guess is that it does seem like the slowdown in the economy is starting to bite at the labour market and that could lower wage pressures moving forward. But until then, the risks of stagflation will still remain and they have a tough job to balance out persistent inflation and navigating a soft landing in the economy.</p><p>Going back to GBP/USD, the pair is stuck in a bit of a range now but sellers will be incentivised to try and retest the 100-day moving average (red line) at 1.2635 and the 3 August low at 1.2620 next.</p>

This article was written by Justin Low at www.forexlive.com.