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But downside in GBP/EUR limited by an equally poor Eurozone PMI.
The pound fell in the minutes after it was reported the British economy suffered a notable slowdown during May, due to a "perfect storm" of factors; however, sterling's losses will be limited by the fact that the UK's not alone in experiencing rising headwinds.
S&P Global said its services PMI slid to 47.9 from 52.7 in April, undershooting estimates for 51.7. The manufacturing sector PMI also surprised, but to the upside, with an unchanged reading of 53.7 in May, which beat estimates for 52.9.
However, manufacturing now represents an increasingly small aspect of the British economy, which is why developments in the services PMI will carry more weight for the broader trajectory of travel.
Reflecting this reality is the composite PMI, which adjusts the data to give a more balanced representation of the economy; it read at 48.5, down from 52.6 and below estimates for 51.6.
A PMI of less than 50 signals contraction, meaning these data point to a deterioration in economic momentum.
"The UK economy is facing a perfect storm, as rising political uncertainty adds to the growing impact from the war in the Middle East. Businesses are reporting falling output, surging inflation, supply shortages and job cuts in May," says Chris Williamson, Chief Business Economist at S&P Global.
The data surprise impacted FX markets, sending the pound to euro exchange rate lower to 1.1550, having been at 1.1560 in the minutes leading to the release.
It's important to note that the impact on GBP/EUR will have been cushioned by a similarly poor Eurozone PMI, released half an hour before. This equivocation should limit downside in the exchange rate, and by the time of update mid-day we've seen the pair recover to 1.1560.
The pound to dollar exchange rate fell from 1.3448 to 1.3430; a distinct move, albeit not earth-shattering.
"Today's dour PMI figures are a brutal reality check for the UK economy. The surge in activity in April was always suspect, as businesses frontloaded orders ahead of anticipated war-driven supply disruptions. This fleeting optimism now looks like nothing more than a dead cat bounce. May's sharp slump in business activity paints a clearer picture - surging energy costs are hollowing out demand, squeezing exports, and straining margins," says Matthew Ryan, Head of Market Strategy at Ebury.
Input cost inflation is a concern, with businesses facing steep rises in May, according to the PMI survey.
This was attributed to fuel surcharges and "intense raw material price pressures."
Hopes that the worst of the price rises are behind us were raised by a moderation in input cost inflation from April's 41-month high.
The data provides evidence of rising inflationary risks facing the UK, which should ensure the Bank of England remains guarded and holds interest rates at current levels for an extended period.
That should ensure the pound's interest rate advantage over the euro and dollar remains intact.
"This combination of a faltering economy and spiking price pressures leaves the Bank of England in a major quandary, facing the growing need to hike rates to help contain inflation but thereby adding to recession risks," says Williamson.
David Rees, Head of Global Economics at Schroders, says the Bank now faces an uncomfortable trade‑off as another energy shock coincides with an already fragile domestic backdrop.
"Markets priced in as many as four hikes at one point, but we suspect the Bank will instead talk tough and stop short of tightening policy," he says. "We doubt that growth will be resilient enough to force tough-talking central banks in Europe and the UK to raise interest rates."