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The British pound rose against the euro, dollar and other major currencies after the UK's PMI survey showed private sector activity reached a two-month high in October.
Sterling was under pressure ahead of the S&P Global's composite PMI release, which rose to 51.1 in October from 50.1 in September as the UK private sector economy regained some momentum.
The economy's services sector led the way, with a PMI of 51.1 in October, up from 50.8 previously.
Most encouraging of all, though, was news the manufacturing sector is close to exiting decline with a PMI of 49.6, which places it close to 50, the line between shrinkage and expansion. This was the manufacturing PMI's best reading in a year.
Forex markets responded to these positive outcomes: the pound to euro exchange rate rose to 1.1469 in the minutes following the release, having been at 1.1450 pre-release. For the pound to dollar conversion, the recovery takes it from 1.33 to 1.3317.
So nothing massive in the price action, but there's a growing sense of sterling resilience ahead of the November 26 budget.
"October’s flash UK PMI survey brings hope that September was a low point for the economy from which business conditions are starting to improve," says Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.
"Output has picked up, with a particularly welcome return to growth for manufacturing for the first time in over a year accompanied by an upturn in demand for services, notably among consumers," he adds.
Above: GBP/USD and GBP/EUR (lower panel) saw a decent bid following the PMI release.
The PMI survey follows the release of official retail sales figures, where it was revealed sales rose 0.5% m/m in September, exceeding estimates for -0.2%, hinting at a potential consumer revival into the crucial year-end for the UK's shops.
"Positive surprises across the board for the UK this AM - no evidence of a budget-related slowdown this year," says Kallum Pickering, Chief Economist at Peel Hunt.
The upcoming November 26 budget is expected to be painful, but falling gilt yields and economic resilience suggest there's a risk of overplaying negative sentiment to the event.
If sentiment improves from here, and the budget doesn't go disastrously wrong, the path to a recovery in GBP/EUR and GBP/USD into year-end becomes visible.
Looking ahead, the PMI release indicates optimism is rising on the anticipation of improved economic prospects.
The composite PMI's future output balance rose to 69.2 from 66.9 in September and the new orders balance increased to 51.4 in October, from 49.5.
"We think the growth data and survey leading indicators show an economy proving surprisingly resilient to high interest rates, inflation nearly double the MPC’s target, tariff uncertainty, and pre-Budget speculation," says Elliott Jordan-Doak, Senior UK Economist at Pantheon Macroeconomics.
Money markets see an above 50% chance that the Bank of England cuts interest rates again in November, however, Pantheon Economic thinks there isn't much scope to cut much further.
"The growth picture still suggests that the neutral rate is high and that rates are only modestly restrictive," says Jordan-Doak.
"Growth only a little below potential means that spare capacity will build only slowly so we remain comfortable with our call to bring forward a February 2026 to this December, with rate setters on hold thereafter," he adds.