UK Services PMI Falls to 48.8 in June, Deepening Contraction

The UK services sector contracted for a second consecutive month in June, with the final S&P Global/CIPS UK Services PMI falling to 48.8 from 49.4 in May, slightly below the preliminary reading of 48.7. The reading marks the steepest decline since January 2023, confirming a loss of momentum for the UK economy in the second quarter of 2026 after a positive start to the year.

For interest rate traders, the persistent contraction in services activity reinforces expectations that the Bank of England may need to ease monetary policy sooner rather than later. The services sector is a key driver of UK GDP and inflation, and a sustained downturn could weaken pricing pressures, potentially giving the BoE room to cut rates. However, strong cost pressures and elevated uncertainty from the Middle East conflict complicate the outlook, as firms continue to face input price inflation. Traders can monitor real-time rate expectations on NowPrice's central bank page to gauge market pricing of BoE moves.

Looking ahead, markets will focus on upcoming UK GDP data and inflation prints for further clues on the economy's trajectory. The BoE's next policy decision in August will be closely watched, with the PMI data adding to the case for a potential rate cut. Any escalation in geopolitical tensions or further weakness in demand could accelerate the downturn, keeping the pound under pressure against major currencies.