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The British pound holds a soft near-term trend against key peers, but we're taking in the news that business confidence has firmed again.
UK business confidence rose to a five-month high in August, according to the Lloyds Bank Business Barometer, which lands at the end of a week of subdued pound sterling performance against both the euro and the dollar.
The headline index increased four points to 53%, a second consecutive monthly gain.
Firms' assessment of their own trading prospects rose two points to 58%, while economic optimism jumped seven points to 49%, following an 11-point increase in July.
Those readings are three and five-month highs respectively.
The net balance of firms expecting to raise prices fell three points to 51%, a third consecutive monthly decline and the weakest reading in four years.
Staffing intentions were near enough unchanged, up a point to 40%.
This tells of an economy where activity expectations are improving while pricing power remains subdued, which is a combination that limits the odds of a rate hike at the Bank of England next month.
"Confidence rose in manufacturing and services to 10 and 13-month highs respectively. It also improved in retail, while easing marginally in construction following July's strong reading," says the report.
The report extends a run of releases that have confirmed a robust domestic economic picture through August. For the pound, the data underpins a multi-week uptrend against the euro and dollar, even if the latest data points have failed to offer a near-term boost.
Above: GBP/EUR at four-hour intervals.
Despite the solid business confidence reading, sterling heads into the weekend having underperformed on the crosses, with the pound-to-euro rate down marginally on the week and holding 1.1650, while the pound-to-dollar rate sits at 1.3589 in its first down week in two.
August in GBP/EUR has been an exercise in compression, with the highs stepping down from 1.1717 on the twelfth to 1.1705 and then 1.1697 on Monday, while the lows have crept up from 1.1645 on the twentieth to 1.1653 on Wednesday.
That is a triangle, and it is a tight one:
Spot at 1.1666 sits almost exactly on the midpoint of the month's entire range, which tells us the market has spent four weeks declining to reject either side of it.
The sequence of lower highs remains the dominant feature and sellers hold the initiative on any approach to 1.1690.
The higher low is the newer information, and Wednesday's refusal to revisit 1.1645 says the selling that took the pair off its mid-August highs has run short of fresh supply.
A sustained move above 1.1700 completes the pattern to the upside and puts 1.1717 back in play, while a loss of 1.1650 exposes 1.1645 and opens the 1.1620s.
The dollar pair is a longer story and a more constructive one.
Above: GBP/USD at daily intervals.
Sterling has built a rising sequence of lows since the summer, from 1.3140 in June to 1.3273 in late July, and August has been spent entirely above 1.3506.
That 1.3506 level did the opposite job through the spring, capping the pair in April and May before giving way, and its conversion from ceiling to floor is the single most constructive feature on the chart.
The pound then spent the middle of August climbing into 1.3660, a level that has turned it back in February, in May, and now twice this month.
This week's weakness is that rejection, and at 1.3589 the pair is holding comfortably inside the upper third of its 2026 range. The read is a pair pressing a multi-month ceiling with the floor rising underneath it.
A daily close through 1.3660 clears air back to 1.3700 and beyond that the February high, while failure keeps the pair rotating between 1.3506 and 1.3660 into September.
Where Next for the Pound? Get the Quarterly Forecast Report
Point forecasts, highs and lows from global banking partners, out to early 2027.
Month-end Flows to Dominate Friday Action
Today is the final trading day of August, and the 4pm London fix carries month-end rebalancing flow: portfolio hedges adjusted against equity and bond performance over the month, executed in size, in a narrow window, for reasons that have nothing to do with the pound's prospects.
That flow is entirely capable of pushing a coiled pair through a level and closing it there, producing a candle that looks like a resolution and is not one.
Reading a breakout off Friday afternoon prices is a trap, and both charts are currently set up to spring it.
The practical response is to discount today's close and treat Monday's open as the first honest print.
