GBP appreciated against other major currencies in the European session on Friday as investors digested the latest survey from S&P Global, which showed that the business activity in the UK’s services sector increased sharply last month.
According to the survey, the S&P Global/CIPS UK services PMI jumped to 53.5 in February from 48.7 in January. The reading was better than the preliminary estimate of 53.3 and marked a return of the British services sector to growth after six straight months of contraction. Economists had forecast the indicator to remain unrevised at 53.3. The February rebound reflected a fading recession fear and improved business confidence, which resulted in the strongest rise in new orders since May 2022.
Focus also was on the on the survey's measures of input cost and output charge inflation in the UK services sector. The input cost inflation dropped to its lowest level since June 2021, while prices charged inflation was only fractionally lower than in January. The latter fact added to signs of sticky inflationary pressures, supporting the case for a 25-basis pion rate hike at the Bank of England’s next meeting later this month.