GBP Strengthens as UK PMI Data Beats, BoE Rate Cut Expectations Diminish

Sterling has gained ground against major currencies after UK Purchasing Managers' Index data for January significantly exceeded expectations, prompting traders to pare back Bank of England rate cut bets. The composite PMI surged to 50.9 from December's 48.9, marking a return to expansion territory and suggesting the UK economy is showing unexpected resilience. This positive surprise has led markets to reassess the likelihood of aggressive BoE easing, with probability of a February rate cut dropping from 80% to 45%. GBP/USD has responded by climbing 0.5% to test the 1.2500 psychological level, while EUR/GBP has fallen to 0.8420 as pound strength dominates. The data suggests UK businesses are adapting better than expected to current economic challenges, potentially limiting the BoE's scope for policy loosening. Near-term resistance for GBP/USD sits at 1.2530, with support established at 1.2450, as traders position for potentially hawkish BoE communications.