UK manufacturing held in expansion territory in August, supporting GBP Sterling as Pantheon economists see activity staying subdued but stable.
Pound Sterling traded on a broadly firmer footing against several major currencies on Tuesday after the final UK manufacturing PMI came in slightly stronger than first estimated.
The Pound to Australian Dollar rose around 0.2% following the release, while GBP/NZD also strengthened and GBP/EUR held modest gains.
GBP/USD was the exception, slipping towards 1.3526 as the Dollar retained broader support.
The S&P Global manufacturing PMI eased to 51.7 in August from 51.9 in July, but beat both the 51.5 flash estimate and consensus.
Pantheon Macroeconomics said manufacturing “continued to chug along at a modest pace in August”, with the revised output index consistent with production rising by around 0.2% on a three-month-on-three-month basis.
The chart shows Sterling responding positively immediately after the PMI, although the largest moves came against the Australian and New Zealand Dollars rather than the Euro or US Dollar.
Hiring Improves, Price Pressures Ease
There were some encouraging details beneath the headline.
Pantheon said the future-output balance rose to a six-month high of 70.9 and concluded that “the growth outlook remains stable”.
Employment was stronger too.
“The employment balance rising to 52.5 in August, from 50.1 in July, and the highest for two years” suggests manufacturers have become more willing to retain or add workers.
Export demand also held up relatively well, a notable change from 2025 when tariff uncertainty weighed heavily on overseas orders.
Price indicators moved in the right direction for the Bank of England.
The input-price balance slipped to 65.3 from 65.9, while output prices dropped much more sharply to 57.6 from 61.5.
Pantheon nevertheless cautioned that “energy prices remaining higher-for-longer will keep the PMI’s price balances elevated”, with risks of another increase as winter approaches.
The overall message is fairly benign for Sterling.
Manufacturing is not booming, but neither is it rolling over, and the improvement in hiring adds to recent evidence that UK activity is proving more resilient than the Bank of England expected.
That resilience helps explain why the Pound held its ground after the release, even as the bigger question for markets remains whether sticky inflation eventually forces the BoE to tighten again.
Our currency coverage draws on live market data, official economic releases and published bank research.
