• UK economic activity rebounds in April, driven by both the services and manufacturing.
• Pound Sterling finds support after PMI data beats market expectations.
• The US Dollar remains supported by geopolitical tensions and the monetary policy outlook.

GBP/USD trades around 1.3500 on Thursday, virtually unchanged on the day, after recovering earlier losses following the release of stronger-than-expected UK activity data.

The Pound Sterling (GBP) draws support after S&P Global data showed a stronger-than-expected rebound in business activity. The flash Composite Purchasing Managers Index (PMI) rises to 52 in April, well above market expectations of 49.8 and the previous reading of 50.3. A simultaneous acceleration in both manufacturing and services sectors drives the improvement. The Manufacturing PMI climbs to 53.6, while the Services PMI reaches 52, pointing to broad-based expansion.

According to Chris Williamson of S&P Global Market Intelligence, the rebound partly reflects a temporary boost driven by companies bringing forward purchases amid concerns over rising prices and supply disruptions linked to geopolitical tensions. Still, the data suggests renewed economic momentum after the slowdown seen in March.

On the monetary policy front, the Bank of England (BoE) is expected to keep interest rates unchanged at 3.75% at its April 30 meeting. While easing inflation, particularly in core and services components, argues against further tightening, elevated inflation expectations due to higher energy prices are likely to limit the scope for near-term rate cuts.

Meanwhile, the US Dollar (USD) maintains a modest firm tone amid a risk-averse environment. Ongoing tensions between the United States (US) and Iran, particularly around the Strait of Hormuz, continue to support demand for the safe-haven currency. Recent military developments and the lack of progress in peace negotiations are keeping uncertainty elevated, reinforcing the Greenback’s appeal.

Monetary policy expectations also underpin the USD. Despite projections for limited rate cuts by the Federal Reserve (Fed), resilient US economic data and persistent inflation pressures linked to energy prices are encouraging a cautious stance from the central bank. This backdrop continues to cap GBP/USD upside despite supportive UK data.

Investors now turn their attention to upcoming US macroeconomic releases, including weekly jobless claims and PMI data, which could further influence near-term direction in GBP/USD.