British Pound tests 12-week lows amid mixed UK PMIs and US Dollar strength

• GBP/USD accelerates its decline and tests 12-week lows in the 1.3270 area.
• The US Dollar is outperforming its peers amid a mix of Fed tightening hopes and optimism about a US-Iran peace deal.
• In the UK, manufacturing activity expanded unexpectedly; services activity fell short of the market's expectations in September.

The British Pound (GBP) accelerates its decline against the US Dollar (USD) on Wednesday, with the GBP/USD pair trading a few pips above 1.3272, its lowest price since July 2. The Greenback maintains its firm tone across the board amid Federal Reserve’s (Fed) tightening hopes and optimism about a fresh attempt to reach a peace deal with Iran while, in the UK, mixed business activity figures have failed to lift the Pound.

Preliminary UK S&P Global Purchasing Managers Index (PMI) figures for September, released earlier in the day, revealed that manufacturing activity improved to 52.0 from 51.7 in August, against expectations of a mild slowdown to 51.6.

Services activity, however, slowed to 51.7, from 52.5 in August, exceeding the market consensus, which had anticipated a 52.0 print. This has pushed the Composite Index down to 51.7 in September, from 52.5 in the previous month.

Fed tightening hopes US-Iran peace negotiations are buoying US Dollar

The US Dollar, on the other hand, maintains a firm bid tone, fuelled by market expectations of further Fed monetary tightening in the coming months and investors' optimism about the outcome of fresh attempts to reach a peace deal with Iran.

Strategists at ING highlight that the Dollar “continues to show very good resilience to lower energy prices and a risk-friendly environment,” arguing that this is “another sign that the Fed story is dominant.”

ING Experts observe that Richmond Fed President Thomas supported the central bank's hawkish stance, affirming that “a single rate hike may not be enough to bring inflation under control.”

Investors are focusing on the United Nations General Assembly this week, where US and Iranian officials are negotiating on the sidelines. The US Special Envoy, Steve Wickoff, has confirmed that contacts are going on, and US President Donald Trump was more explicit, stating that the US had ”a very good meeting, a very productive meeting” with Iranian officials, and that there was “a lot of momentum” towards an agreement.