LONDON: Sterling edged away from a five-week high against the euro and a ten-day peak against the dollar on Monday after data showed activity in the UK's manufacturing sector slowed by more than expected in August.
The Markit/CIPS UK Manufacturing Purchasing Managers' Index (PMI) dropped to 52.5 in August - its lowest level since June last year and below all forecasts in a Reuters poll - from July's downwardly revised 54.8.
Separate data showed some signs of moderation in the housing market, as British mortgage approvals fell slightly in July. Recent surveys of the housing market have offered mixed signals about the strength and durability of the UK's upturn.
The pound fell to $1.6623 from a ten-day high of $1.6645 before the data, still leaving it 0.2 percent up on the day.
Consumer credit rose by 1.1 billion pounds, Bank of England data showed, far exceeding a Reuters poll forecast for a 550 million pound increase.
"The pound has held up fairly well off the back of that (PMI) and is maybe focusing more on the consumer credit numbers. Manufacturing is a much smaller proportion of our economy than services," said Kathleen Brooks, research director at Forex.com.
The manufacturing data will be followed on Tuesday and Wednesday with PMIs from the construction and dominant services sectors respectively.
An earlier PMI from the euro zone also showed manufacturing growth slowed more than initially thought in August as new orders dwindled and factories suffered amid worries over Ukraine.
That helped the common currency fall to a five-week low of 78.92 pence before the UK data. But the euro then pared losses to trade at 79.06 pence, down 0.1 percent against the pound.
"We expect the same (moderation) for both the construction and services PMIs and coupled with modest upside risk to the euro this week, we would treat a potential euro/sterling move back towards the 80 pence level as an attractive selling opportunity," said Peter Krpata, a currency strategy at ING.
British government bond futures FLGcv1 pared some of their losses after the data, gaining about five ticks to 113.47.
The Bank of England's Monetary Policy Committee will meet on Wednesday but markets will have to wait another two weeks to see whether there has been any further dissent from Governor Mark Carney's decision to keep interest rates at their record lows.
So far just two of the MPC's nine members - Martin Weale and Ian McCafferty - have voted in favour of an immediate rate hike and no one is expected to join them in September.
"I think they may end up being on their own for a little while. I wouldn't expect any dissenters (in September), particularly if we see further declines in PMIs in the services sector," said Forex.com's Brooks.
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