UK Preliminary Services PMI unexpectedly jumps to 58.0 in October vs. 54.5 expected

• UK Manufacturing PMI beats estimates with 57.7 in October.
• Services PMI in the UK surprises positively with 58.0 in Sept.
• GBP/USD jumps towards 1.3800 on upbeat UK PMIs.

The seasonally adjusted IHS Markit/CIPS UK Manufacturing Purchasing Managers’ Index (PMI) unexpectedly improved to 57.7 in October versus 55.8 expected and 57.1 – September’s final reading.

Meanwhile, the Preliminary UK Services Business Activity Index for October surprised positively, arrived at 58.0 versus September’s final readout of 55.4 and 54.5 expected.

Chris Williamson, Chief Business Economist at IHS Markit, commented on the survey

“The UK economy picked up speed again in October, but the expansion is looking increasingly dependent on the service sector, which in turn looks prone to a slowdown amid the recent rise in COVID-19 cases. Growth is also being accompanied by an unprecedented rise in inflationary pressures, which will inevitably feed through into higher consumer prices in coming months.”

"The news comes at a time when the Bank of England is already leaning towards hiking interest rates to safeguard against inflationary expectations becoming entrenched. The record readings of the PMI survey’s price gauges will inevitably pour further fuel on these inflation worries and add to the case for higher interest rates.”

FX implications

Upside surprise in the UK Preliminary Manufacturing and Services PMIs offered a fresh life to the GBP bulls, as the GBP/USD pair bounced back to 1.3800, where it now wavers.

The spot reversed losses to now trading higher by 0.05% on the day.