Investing.com - The pound fell to almost three month lows against the dollar on Tuesday after data showing that growth in the UK manufacturing sector slowed last month, dampening the outlook for third quarter growth.
GBP/USD hit lows of 1.5310, the weakest since June 9, down from around 1.5359 ahead of the data, before pulling back to 1.5341.
The Markit U.K. manufacturing purchasing managers' index fell to 51.5 in August from 51.9 in July, compared to expectations for a rise to 52.0.
The domestic market remained the main pillar of new order growth, as the level of new export business decreased for the fifth straight month.
But export orders continued to contract and companies linked reduced overseas demand to the sterling exchange rate, weak sales performance to the euro zone and the slowdown in China.
"The UK manufacturing sector remains in a holding pattern, with production growth hovering around the stagnation mark and marginal job losses reported for the first time in 26 months," said Rob Dobson, senior economist at survey compiler Markit.
"On this basis, the sector looks unlikely to make much of a contribution to the solid gain in broader GDP growth expected for the third quarter."
The pound was also lower against the euro, with EUR/GBP last at 0.7350.
In the euro zone, data on Tuesday showed that manufacturing growth slowed in August.
The euro zone manufacturing PMI dipped to 52.3 last month, from 52.4 in July as solid growth in Germany, the Netherlands and Spain was offset by fresh contractions in France and Greece.
Earlier Tuesday weak Chinese economic reports added to fears over the outlook for the world’s second-largest economy.
Manufacturing activity in China contracted at its fastest rate in three years in August, while service sector activity also slowed.
The dollar remained under pressure amid ongoing uncertainty over whether the recent turmoil in global financial markets will prompt the Federal Reserve to delay hiking short-term interest rates.
Investors were looking ahead to Friday’s U.S. jobs report for August, which could help to provide clarity on the likelihood of a near-term interest rate hike.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.44% to 95.55, holding above the eight-month trough of 92.52 set last Monday.