1.3670: Sterling Hits Six-Month High as UK PMI Beats Expectations

Sterling rose to a six-month high against the dollar on Friday, after UK business activity data beat expectations, providing upward momentum for the pound. At the time of writing, GBP/USD was trading at 1.36576, having earlier broken above the 1.3660 level for the first time since February.

**UK Data Provides Support, Dollar Weakens in Tandem**

Stronger-than-expected UK PMI data served as the direct catalyst for sterling's gains, showing resilience in UK business activity. Meanwhile, the dollar faced pressure as the US Treasury planned to increase bond buybacks, undermining the greenback's appeal. The combination of these factors pushed GBP/USD to cyclical highs.

**Sustainability of Sterling's Move Remains to Be Seen**

Despite sterling's strong short-term performance, market views on the outlook are divided. Some analysts noted that sterling has previously given back gains after multiple rallies, indicating that support at higher levels is not firmly established. The dollar's medium-to-long-term trajectory remains influenced by credit and policy divergences, with downside pressure not fully alleviated, which could continue to provide some support for sterling. However, if UK economic data turns weaker going forward, sterling's rally could face setbacks.

**Policy and Economic Data in Focus Ahead**

Market participants believe whether sterling can hold current highs depends on subsequent UK economic data and dollar movements. According to CME Group analysis, the dollar remains subject to policy uncertainty in the medium-to-long term, while UK and eurozone PMI data are due for release, with the figures set to influence further market pricing of sterling. Investors need to monitor whether UK economic fundamentals can continue to provide support.