The Pound Sterling (GBP) struggles to find direction on Wednesday as investors await the preliminary S&P Global PMI data for August. The GBP/USD pair
pair trades in a lackluster fashion, but volatile action is expected following the PMI data release, which will demonstrate the impact of higher interest rates by the Bank of England on British economic activities.
According to the estimates, Manufacturing PMI will drop to 45.0 vs. July’s reading of 45.3. A figure below 50.0 is considered a contraction in economic activities. Also, Services PMI is expected to remain lower at 50.8 against the former reading of 51.3. The BoE warned about significant upside risks to corporate defaults amid higher interest rates. A survey from the BoE shows that the share of non-financial UK companies experiencing a weak debt-service coverage ratio will rise to 50% by year-end from last year’s reading of 45%.
A majority of companies experiencing rising corporate debt-service stress will elevate the risk of a recession in the UK economy. Discussions about the UK’s cabinet reshuffle remained hot this weekend. Reuters reported that PM Sunak is now considering focusing on replacing ministers who have already said they want to step down, such as former Defence Secretary Ben Wallace.The US Dollar Index gathers strength to climb above the immediate resistance of 103.70. Consumer spending resilience and a tight labor market could keep the remaining excess inflation extremely stubborn.
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