LONDON: Sterling jumped 1 percent to hit a one-month high and traded above $1.32 against the dollar on Thursday, after data showing the British manufacturing sector staged one of its sharpest rebounds on record in August.
The Markit/CIPS Purchasing Managers' Index (PMI), a closely watched gauge of factory activity, jumped to a 10-month high of 53.3 in August, recovering from the three-year low it hit in July after Britain's June 23 vote to leave the European Union.
August' s headline rise matched the biggest month-on-month increase in the survey's nearly 25-year history, Markit said.
Sterling rose 1 percent to $1.3267, from $1.3152 beforehand while the euro fell to 84.125 pence per euro , down from 84.68 pence before the survey was released.
"Certainly this is great news for the British economy and a sign that the Bank of England need not push for any further accommodation in the coming months," said Neil Wilson, market analyst at ETX Capital, adding the focus was turning to the services sector PMI survey, due on Monday.
"The omens are good, with consumer spending very robust. However, let's remember that Brexit negotiations have not even begun yet so there is still plenty of time for things to turn south."
Sterling has performed reasonably well in the past few weeks, helped by better-than-expected data that has taken the edge off concerns about a sharp decline in economic activity following the shock Brexit vote.
Surveys this week showing improved consumer confidence and a rise in British house prices in August have added to signs the economy is holding up well.
"Today's PMI reading will see a continuation of buying as the pound gets an infusion of confidence," said Richard de Meo, managing director of Foenix Partners, a firm that offers currency hedging solutions to British companies.
A sell-off in euro zone government bonds gathered pace after the data, with Germany's benchmark 10-year bond yield up 3 basis points at minus 0.036 percent.
The British 10-year gilt yield also rose to hit its highest level in a month.
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