Advertisement
UK markets close in 4 hours 1 minute
  • FTSE 100

    8,149.86
    -33.10 (-0.40%)
     
  • FTSE 250

    21,147.11
    -42.41 (-0.20%)
     
  • AIM

    783.76
    -1.72 (-0.22%)
     
  • GBP/EUR

    1.1896
    +0.0001 (+0.01%)
     
  • GBP/USD

    1.2964
    -0.0002 (-0.01%)
     
  • Bitcoin GBP

    49,170.83
    +1,044.52 (+2.17%)
     
  • CMC Crypto 200

    1,321.74
    -19.22 (-1.43%)
     
  • S&P 500

    5,631.22
    +15.87 (+0.28%)
     
  • DOW

    40,211.72
    +210.82 (+0.53%)
     
  • CRUDE OIL

    80.75
    -1.16 (-1.42%)
     
  • GOLD FUTURES

    2,443.50
    +14.60 (+0.60%)
     
  • NIKKEI 225

    41,275.08
    +84.40 (+0.20%)
     
  • HANG SENG

    17,727.98
    -287.96 (-1.60%)
     
  • DAX

    18,496.45
    -94.44 (-0.51%)
     
  • CAC 40

    7,569.59
    -63.12 (-0.83%)
     

Pound holds firm amid bond market turmoil

The pound sterling held firm against the euro and US dollar on Wednesday after the S&P Global Services PMI for September was upgraded. Photo: Getty.
The pound sterling held firm against the euro and US dollar on Wednesday after the S&P Global Services PMI for September was upgraded. Photo: Getty. (John Lamb via Getty Images)

The pound sterling held firm against the euro and US dollar on Wednesday after the UK services sector contracted less than expected and the yields on UK government bonds hit highest level since 1998.

The yield, or interest rate, on 30-year UK gilts, was at 5.115%, according to Refinitiv data, as traders believe inflation will be more sticky.

There was a wider sell-off in the bond market. US treasuries led a selloff in debt markets following stronger-than-expected job openings data. US Treasury yields hit their highest since 2007 amid fears the Federal Reserve will keep borrowing costs painfully high for longer than hoped.

ADVERTISEMENT

Earlier, the S&P Global Services PMI for September was upgraded to 49.3, from 47.2 in the first estimate, a good revision higher but still at its weakest performance in in eight months.

Read more: UK government bond yields highest since 1998

"Service sector activity remained on a negative trajectory in September as cutbacks to non-essential business and consumer spending weighed on sales volumes. Although only modest and slower than indicated by the earlier 'flash' PMI reading, the downturn in UK service sector output was the greatest seen since the beginning of this year and stood in contrast to solid growth during the spring months,” S&P Global said.

Following the update, against the US dollar, the pound (GBPUSD=X) rose to 1.21, so £1 will buy you $1.21. Against the euro, the pound (GBPEUR=X) was at €1.15.

Meanwhile, the Composite PMI, which adjusts the services, construction and manufacturing PMIs to give a more accurate snapshot of the broader economy, was revised higher to 48.5 from 46.8 in the first estimate, suggesting a mild contraction in the UK economy given the readings are still below 50.

Read more: Why petrol and diesel prices do not fall with oil prices

Matthew Ryan, head of market strategy at financial services firm Ebury commented on the sterling’s strength against the USD, and also noted the upward revision in UK GDP data, and why he believes a December rate hike is likely.

“Last week’s upward revision to UK GDP data has provided reason for optimism, albeit a lack of confidence that the Bank of England will deliver additional interest rate hikes has kept the pound pinned around 6-month lows.

“While investors see little chance of another BoE hike at the next MPC meeting in November, we are still pencilling in one more rate increase in the current cycle, potentially in December, which we think would be bullish for GBP. “

He also noted that upside in the UK currency appears relatively limited “given the rather bleak economic outlook, and the lingering possibility of a recession in early-2024”.

Watch: Uber adds 'Return a Package' feature to app

Download the Yahoo Finance app, available for Apple and Android.