LONDON: Sterling firmed against the dollar on Tuesday on forecast-beating data, but market participants stayed wary of central bank policy and were ready to sell the pound at higher levels.
A survey showed British business confidence was at its highest since 2007, while another on Monday showed UK manufacturing recorded its strongest growth in more than two years in June.
That was followed by better-than-expected mortgage lending numbers, which also helped the currency. Construction and services activity surveys on Tuesday and Wednesday could add to the picture of a recovering UK economy.
"Data shows that things are perhaps improving a little for the UK economy and that is supporting sterling," said Simon Smith, chief economist at FXPro.
"But longer term, sterling could fall against the dollar with the US Federal Reserve gearing markets towards the tapering of bond purchases later in the year."
Such a move should support the dollar.
Sterling was up 0.1 percent at $1.5232, rising off Friday's four-week low of $1.5165, which is acting as near-term support. Resistance was cited at the May 16 high of $1.5323.
New Bank of England governor Mark Carney chairs his first meeting of the Monetary Policy Committee on Thursday.
The committee is widely expected not to change interest rates or its quantitative easing policy. But analysts said Carney might introduce new measures, such as issuing forward guidance on policy, perhaps as early as August.
"We do not expect Carney to be able to push through a new round of QE in his first meeting," analysts at BNP Paribas said in a note.
"An alternative outcome could see the (Monetary Policy) Committee providing a statement to detail its interpretations of developments in the UK against the backdrop of tightening financial conditions and softening global outlook."
The euro was down 0.1 percent at 85.74 pence, off an earlier peak of 85.945 pence and stalling before stiff chart resistance at 86 pence.
The euro could come under pressure before a European Central Bank meeting on Thursday, with President Mario Draghi likely to stress that monetary policy will stay accommodative.
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