Pound Retreats as Weaker-than-Expected Manufacturing Data Adds Pressure

The British Pound (GBP) has retreated to the 1.3450 area following weaker-than-expected UK manufacturing data, which added pressure on the currency.

The July S&P Global Manufacturing Purchasing Managers' Index (PMI) was revised down to a reading of 51.2, from preliminary estimates of 52.8. This indicates a moderate slowdown in the sector's activity, down from June's 52.5 reading.

Hopes of Iran peace talks and a risk-off mood have provided some support for the Pound, which had rallied to fresh seven-week highs above 1.3500 earlier on Monday.

Strategists at Brown Brothers Harriman observe 'scope for a downward adjustment to UK interest rate expectations,' which is seen as a headwind for GBP. They note that the swaps curve implies 50bps of tightening to 4.35% in the next twelve months, but see room for this pricing to be revised lower.