LONDON: Sterling hit a five-month high on Tuesday, rising past $1.57 against the dollar after better-than-expected industrial output data bolstered the view that the British economy is outpacing many of its developed world peers.
Industrial output rose 0.5 percent in March -- the strongest growth since September and above economists' forecasts of no change -- after inching up 0.1 percent in February, the Office for National Statistics said. That led to talk that first-quarter growth data for Britain maybe revised upwards.
Leading economic research body the National Institute of Economic and Social Research said Britain's economy probably grew by 0.4 percent in the three months to April.
Sterling rose to $1.5710, the highest since mid- December, before slipping back to $1.5665 in afternoon trade, still up 0.5 percent on the day. It rose past its 200-day moving average of $1.5624, and a close above which would be a bullish short-term signal, chartists said.
The pound has been supported in the past two sessions by the re-election of the business-friendly Conservative Party and speculation the Bank of England, which issues its quarterly inflation report on Wednesday, may trigger a change in bets on when it will deliver a first post-crisis rise in interest rates.
"The good news continues for the pound," said Alex Edwards, head of the corporate desk at UKForex. "With continued uncertainty over U.S. interest rates and the UK election result likely to continue providing support, the medium-term outlook for sterling/dollar looks positive."
The euro pared gains against the pound and was at 71.855 pence, having traded at 72.23 pence before the data was released. The euro had been rising earlier, tracking a rise in 10-year German Bund yields, which outpaced a rise in UK gilt yields, helping rate differentials move in favour of the single currency.
Back in Britain, the BoE's monetary policy committee kept rates steady as expected on Monday at the record low of 0.5 percent prevailing since 2009. It issued no statement, but Governor Mark Carney is due to give a quarterly update on its growth and inflation forecasts on Wednesday.
A number of analysts and traders expect the BoE to look past subdued inflationary pressures and reiterate the next move is likely to be a hike. Investors currently price in a chance of a hike in the bank rate in the first quarter of 2016.
"The BoE stance will be determinant for the mid-term direction," said Ipek Ozkardeskaya, analyst at London Capital Group. "The BoE will likely sound upbeat regarding the recovery in UK activity. However, the monetary stance will certainly remain balanced and may disappoint the hawks currently dominating the UK market."
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