Investing.com – The pound rose to its highest level in almost six-years against the dollar on Tuesday after data showed that growth in the U.K.’s manufacturing sector accelerated more quickly than expected in June.
GBP/USD was up 0.11% to 1.7123, the highest level since October 2008, from around 1.7102 ahead of the data.
Cable was likely to find support at 1.7095, the session low and resistance at 1.7200.
Markit said the U.K. manufacturing purchasing managers’ index rose to 57.5 last month, up from 57.0 in May. Analysts had expected the index to tick down to 56.8.
The report said new orders continued to increase on the back of stronger domestic and export demand. Meanwhile, jobs creation in the sector rose to its highest in 39 months, led by increases in small firms.
“We expect official manufacturing production to have expanded in the second quarter at a pace above the 1.5% registered in the first quarter, making further headway into recovering pre-crisis output levels, ” Rob Dobson, senior economist at survey compiler Markit, said.
The report indicated that the U.K. economy continued to grow at a strong pace in the second quarter, fuelling expectations that the deepening recovery will prompt the Bank of England to raise interest rates before then end of this year.
The dollar remained under pressure since data last week showing a 2.9% economic contraction in the first quarter bolstered expectations that the Federal Reserve will keep rates on hold for an extended period.
Speaking Monday, San Francisco Fed President John Williams underlined this view, saying the bank will probably need to hold interest rates near zero for at least another year, despite signs that the economy is improving.
Investors were turning their attention to the U.S. nonfarm payrolls report, due to be released one day early on Thursday, for further indications on the strength of the labor market.
Elsewhere, sterling was higher against the euro, with EUR/GBP slipping 0.14% to 0.7992 from 0.8004 before the release of the data.
In the euro zone, data on Tuesday indicated that the manufacturing recovery is losing momentum.
Markit's euro zone manufacturing PMI dipped to a seven-month low of 51.8, down from 52.2 in May. Growth in the German factory sector slowed to an eight month low of 52.0, while the French manufacturing PMI fell to a six-month low of 48.2.