GBP under pressure as UK Services PMI drops to 48.8, lowest in 3.5 years

The British pound faces downward pressure after the UK's final June Services PMI printed at 48.8, slightly above the 48.7 preliminary reading but well below the prior month's 49.3, confirming contraction in the dominant services sector. The Composite PMI also declined to 49.3 from 49.7 previously, signaling the sharpest loss of economic momentum since late 2022. Key findings reveal activity falling at the greatest pace in nearly three and a half years, with new orders decreasing for the fourth consecutive month. On a positive note, input cost inflation eased to its lowest level since March, which could reduce pressure on the Bank of England to maintain restrictive monetary policy. S&P Global's Tim Moore noted a "clear loss of momentum for the UK economy during Q2 2026" following a stronger start to the year. GBP/USD traders should monitor upcoming BoE commentary for signals on how policymakers interpret this deterioration. The combination of weakening growth and easing inflation creates a complex backdrop that may support expectations for earlier rate cuts, adding further headwinds for sterling.