The British pound (GBP) held steady against the U.S. dollar on Thursday after surging over 1% the previous day, marking its largest daily gain since April 2025. The rebound was supported by an upward revision to UK business activity data, indicating a more robust economic outlook than previously expected.

The pound was last trading marginally lower by 0.1% at $1.3348, following an earlier peak at $1.33585, its highest level in over five weeks.

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UK Business Activity Revision Boosts the Pound

The latest data from S&P Global UK Composite Purchasing Managers’ Index (PMI), which tracks both manufacturing and services sectors, was revised upwards on Wednesday. The revision suggests that the UK economy is growing faster than initially thought, providing a boost to investor confidence in the pound.

Kirstine Kundby-Nielsen, analyst at Danske Bank, said:

“The growth outlook doesn’t look as muted as it was initially assumed.”

The positive revision signals that UK businesses are performing better, potentially supporting further economic expansion as 2026 approaches.

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Budget Concerns Ease

The pound’s gains were also bolstered by reduced concerns over the UK government’s recent budget. Finance Minister Rachel Reeves’s budget, which included tax increases and large-scale public spending, had initially raised fears of market instability.

However, bond markets reacted calmly, and UK borrowing costs have since declined, reflecting a more measured response from investors.

“The Labour government didn’t really stir markets that significantly,” said Kundby-Nielsen.
“What we’ve been seeing over the past week is some of that budget risk being priced out.”

This easing of fiscal concerns helped the pound recover after weeks of volatility.

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Bank of England Expected to Cut Rates

Analysts also noted that the budget measures are unlikely to drive higher inflation, giving the Bank of England (BoE) flexibility to lower interest rates later this month. Market expectations currently indicate a 90% probability of a rate cut at the BoE’s upcoming policy meeting.

Against the euro, the pound remained largely unchanged at 87.44 pence, reflecting broader stability in the GBP/EUR currency pair.

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Market Outlook

The sterling’s recent strength highlights renewed investor confidence in the UK economy following a period of uncertainty. Positive PMI revisions, a smoothly received budget, and prospective BoE rate cuts have collectively supported the currency, while broader global factors continue to influence the pound’s performance against other major currencies.

Market analysts will be closely watching UK inflation data, BoE statements, and global economic indicators to assess whether the pound can sustain this momentum into early 2026.