British Pound: Downside risks grow as UK PMIs slump – BBH

FXStreetMay 21, 2026 12:50 PM

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Brown Brothers Harriman’s (BBH) Elias Haddad notes GBP/USD is consolidating near 1.3440 but warns that a likely downward repricing of the UK swaps curve and a potential further leftward pivot by a Labour government could undermine the Pound. Weak May PMI data and still-aggressive BOE pricing reinforce downside risks for Sterling.

Sterling vulnerable on softer data and policy repricing

"GBP/USD is consolidating around 1.3440. However, scope for a downward adjustment to the UK swaps curve alongside the rising likelihood the Labour government pivots further leftwards can further undermine GBP."

"The UK May PMI points to a contraction in private sector activity. The composite PMI unexpectedly plunged -4.1ppt to a 13-month low below the 50 boom/bust level at 48.5 (consensus: 51.6) driven entirely by the services sector. The services PMI declined -4.8ppt to 47.9 (consensus: 51.7), the lowest since January 2021, while the manufacturing PMI was unchanged at 53.7 (consensus: 53.0)."

"The swaps curve trimmed BOE rate hike expectation in the next twelve months to 57bps from 75bps. That’s still too aggressive given the BOE estimates a negative output gap between -1.5% and -1.7% of potential GDP in 2026."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

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