European session review: GBP mostly lower with worse-than-expected UK PMI data and upcoming BoE meeting in focus

GBP fell against most other major currencies in the European session on Monday as investors weighed the latest UK PMI data, while awaiting the outcomes of the Bank of England’s (BoE) policy meeting on Thursday.

IHS Markit reported that activity in the UK’s manufacturing sector improved solidly in July, as output growth hit a 32-month high supported by the sharpest rise in new order volumes since the end of 2018. According to the report, the seasonally adjusted IHS Markit/CIPS Purchasing Managers’ Index (PMI) rose to a 16-month high of 53.3 in July, up from 50.1 in June but below the earlier flash estimate of 53.6. The latest PMI pointed to the strongest pace of expansion in the UK’s manufacturing sector since March 2019. Economists had forecast the reading to remain unrevised at 53.6.

The Bank of England (BoE) will announce its latest interest rate decision and rate statement on Thursday. It is expected that the British central bank will leave its policy rate and quantitative easing program unchanged.

Market participants also continued to monitor how work the UK government’s strategy of local lockdowns, targeting areas which have suffered outbreaks. Last week, the UK's PM Boris Johnson ordered swathes of the north of England back into partial lockdown, banning people in Greater Manchester, Bradford, Blackburn from holding indoor meetings with different households.