Sterling steady but weak business activity data weighs

A survey ‌on Thursday showed British companies suffering their most widespread drop in activity in more than a year due to the economic fallout from the Iran war and political uncertainty at home. Data company S&P Global's preliminary UK ‌Composite Purchasing Managers' Index for May tumbled to 48.5, from 52.6 in April, its first sub-50.0 ‌reading since April 2025 and far below the 51.6 median in a Reuters poll.

The pound was steady against the ​dollar on Thursday as broader currency markets ​focused on developments in the Iran ‌war, while ​traders digested some worse-than-expected surveys of British business activity.

Sterling was flat at $1.3437. Against the euro, the pound was 0.13% higher at 86.42. A survey ‌on Thursday showed British companies suffering their most widespread drop in activity in more than a year due to the economic fallout from the Iran war and political uncertainty at home.

Data company S&P Global's preliminary UK ‌Composite Purchasing Managers' Index for May tumbled to 48.5, from 52.6 in April, its first sub-50.0 ‌reading since April 2025 and far below the 51.6 median in a Reuters poll. A PMI below 50.0 indicates slowing activity. The figure overshadowed recent positive British data reads, including strong Q1 GDP figures last week and inflation figures on Wednesday.

April's CPI figures ⁠on ​Wednesday showed inflation came ⁠in at 2.8% in April, down from 3.3% in March and below economists' expectations for a 3% reading. "It's a case of ⁠what might have been for the UK," said Henry Cook, senior economist at MUFG Bank.

"In a different world, ​we'd be looking at that Q1 GDP number and saying this is a great platform for ⁠growth ahead, yesterday's inflation number would have been potentially bang on target... we'd be looking at a couple of BoE rate ⁠cuts ​this year." "That's a different world," he said, highlighting the ongoing closure of the Strait of Hormuz that has choked the global flow of oil and led to a surge in energy prices, ⁠upending central bank expectations and the global growth outlook.

In April, the Bank of England kept interest rates ⁠on hold and assessed the ⁠potential economic impacts of the U.S.-Israeli war on Iran, one of which could necessitate a "forceful" increase in borrowing costs. Even so, money market bets indicate an 86% ‌chance of ‌no change at the BoE's next meeting on June ​18.

(Editing by Alex Richardson)