Investing.com - The pound rose to fresh multi-year highs against the dollar on Thursday after data showed that manufacturing activity in the U.K. expanded at the fastest rate in five months in April, bolstering the outlook for the wider recovery.
GBP/USD touched highs of 1.6922, the most since August 2009, and was last up 0.21% to 1.6906. The pair had been trading at 1.6839 ahead of the data.
Cable was likely to find support at 1.6868, the session low and resistance at 1.7000.
Sterling rallied after Markit reported that its U.K. manufacturing purchasing managers’ index rose to 57.3 last month from 55.8 in March. Analysts had expected the manufacturing PMI to decline to 55.4.
Growth increased across the sector, as firms reported a rise in new orders, and new product launches. Manufacturers also took on more staff, with employment rising for the twelfth consecutive month.
Rob Dobson, Markit's senior economist, said manufacturing output growth had accelerated to "a level among the highest signaled over the past two decades".
“Supporting these efforts are a strong domestic market and improving global economic conditions, while the ongoing solid upswing in employment is providing the capacity to meet the needs of demand looking ahead,” he said.
A recent string of upbeat reports about the U.K. economy has raised expectations the Bank of England could raise borrowing costs ahead of other central banks.
Earlier in the week, BoE Governor Mark Carney said the U.K. recovery is starting to “broaden”, but added that the bank still sees plenty of slack in the labor market.
The dollar remained under pressure after data on Wednesday showed that the U.S. economy grew at an annual rate of just 0.1% in the first three months of the year, well below forecasts for an expansion of 1.2%.
Despite the sharp slowdown in growth the Federal Reserve said Wednesday it would reduce its bond purchases to $45 billion a month, in a widely expected decision. The Fed also said interest rates would remain on hold at record lows for a "considerable time" after the bond-buying program ends later this year.
The U.S. central bank acknowledged that first quarter growth was far weaker than expected, but added that growth had started to pick up in recent weeks.
The pound slightly higher against the euro, with EUR/GBP slipping 0.07% to 0.8213, down from 0.8226 before the report.