Investing.com - The pound touched intra-day highs against the dollar on Wednesday after survey data showing that the U.K. manufacturing sector made a strong start to 2017.
GBP/USD was up 0.21% to 1.2609 from around 1.2575 earlier.
The Markit manufacturing purchasing managers’ index ticked down to 55.9 in January from December’s two-and-a-half year highs of 56.1, in line with forecasts.
Output rose at the fastest rate since May 2014, as new order intakes expanded at a robust pace, the report said.
But the report also pointed to ballooning price pressures, as input costs rose at their fastest rate in 25 years, pushed up by the almost 20% drop in sterling since June’s Brexit vote and higher costs for commodities, such as steel and oil.
This prompted manufacturers to raise the prices they charged for goods at the fastest rate since April 2011.
"With cost pressures increasingly feeding though to higher selling prices at factories, it looks inevitable that consumer price inflation will rise further in coming months," said Rob Dobson, senior economist at survey compiler Markit.
"The question is whether increased cost ... pressure will act as a drag on manufacturing growth going forward."
The data came as investors were turning their attention to the Bank of England’s upcoming policy meeting and inflation report on Thursday.
The BoE is expected to revise up its outlook for inflation and growth, but uncertainty over Brexit is expected to cloud the outlook.
Sterling was also higher against the euro after the data, with EUR/GBP down 0.31% at 0.8555.
Meanwhile, the dollar continued to struggle after falling to multi-week lows in the previous session after comments by the Trump administration indicated that Washington may increasingly focus on the dollar exchange rate in relation to trade.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.13% to 99.67.
On Tuesday, the index fell to lows of 99.40, the weakest level since November 14 and ended the month with a loss of 2.75%.