Sterling Slips as Factory Slowdown Confirmed

Sterling fell against the dollar due to a slowdown in factory activity in September. Despite this, it remains close to recent highs. Federal Reserve comments and upcoming U.S. jobs data are key market movers. The UK Manufacturing PMI remained unchanged, and investors await the new finance minister's first budget.

Sterling dipped against a firming dollar on Tuesday as survey data confirmed a slowdown in factory activity in September. Despite this dip, the British currency remains close to its recent highs.

The dollar strengthened broadly after Federal Reserve Chair Jerome Powell dismissed expectations for extensive interest rate cuts. Key markets this week will include the U.S. jobs report, which could offer insights into the health of the U.S. economy and influence Fed policy.

The S&P Global UK Manufacturing PMI remained at 51.5 in September, unchanged from preliminary estimates, amid concerns over the new UK government's budget. Concurrently, rising expectations of European Central Bank policy easing affected the euro. Stubborn British inflation has tempered expectations for significant monetary policy easing in the UK.

Michael Brown, senior research strategist at Pepperstone, noted that external catalysts are currently influencing the pound more. Investors are particularly focused on the Oct. 30 budget announcement from new finance minister Rachel Reeves, which could impact economic recovery and the currency's strength.