Investing.com - The pound firmed to five-hear highs against the dollar on Thursday after data revealed a pickup in U.K. manufacturing activity, though solid U.S. personal spending and income numbers cushioned the dollar somewhat.
In U.S. trading on Thursday, GBP/USD was trading at 1.6900, up 0.16%, up from a session low of 1.6870 and off a high of 1.6922.
Cable was likely to find support at 1.6778, Monday's low, and resistance at 1.7042, the high from August 5, 2009.
The pound took off after Markit Economics 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 businesses reported gains in new orders, and new product launches. Manufacturers also took on more staff, with employment rising for the twelfth consecutive month.
A recent string of upbeat reports about the U.K. economy has raised expectations the Bank of England could hike interest rates as soon as the first quarter of next year.
Meanwhile in the U.S., the Department of Labor reported that the number of individuals filing for initial jobless benefits last week rose by 14,000 to 344,000 from the previous week’s upwardly revised total of 330,000.
Analysts had expected jobless claims to fall by 11,000 to 319,000.
Offsetting the disappointing jobless claims figures, the Commerce Department reported earlier that U.S. personal spending rose 0.9% in March from an upwardly revised 0.5% the previous month, beating expectations of 0.6%.
Consumer spending is the single biggest component of U.S. economic growth, accounting for as much as two-thirds of economic activity.
The report added that personal income rose 0.5%, beating expectations for a 0.4% increase.
Separately, the Institute for Supply Management said its manufacturing PMI rose to 54.9 last month from 53.7 in March, outpacing expectations for a 54.3 reading.
The reports came one day after data showed that the U.S. economy expanded at an annual rate of just 0.1% in the first quarter, well below forecasts for an expansion of 1.2%, though markets attributed the poor showing to rough winter weather that disrupted commerce earlier this year.
Despite the sharp slowdown in growth the Federal Reserve said Wednesday it would reduce its monthly bond purchases to $45 billion from $55 billion, as regardless of a sluggish first quarter, the economy has been showing signs of gaining steam in recent weeks.
Investors were looking ahead to Friday’s April nonfarm payrolls report, which was expected to show that the recovery in the labor market was continuing.
Elsewhere, sterling was up against the euro, with EUR/GBP down 0.17% at 0.8206, and up against the yen, with GBP/JPY up 0.24% at 172.91.
On Friday, the pair will move on the U.S. April jobs report.
Elsewhere, the U.S. is to issue a separate report on factory orders, while the U.K. is to release data on construction sector activity.