Investing.com - The pound was holding close to five-year highs against the dollar on Thursday, as upbeat U.K. manufacturing data bolstered optimism over the recovery, while investors weighed the release of some mixed U.S. economic reports.
GBP/USD was last trading at 1.6890, after rising to highs of 1.6922 earlier, the strongest level since August 2009.
Cable was likely to find support at 1.6868, the session low and resistance at 1.7000.
Sterling rallied after Markit 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 firms reported a rise 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.
In the U.S., data showing an unexpected increase in initial jobless claims was offset by stronger than expected reports on consumer spending and manufacturing.
The Department of Labor said the number of people 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.
At the same time, the Commerce Department reported that U.S. personal spending rose 0.9% in March, from an upwardly revised 0.5% the previous month and ahead of expectations of 0.6%.
Consumer spending is the single biggest source of U.S. economic growth, accounting for as much as two-thirds of economic activity.
The report also showed 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, compared to expectations for a reading of 54.3.
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%.
Despite the sharp slowdown in growth the Federal Reserve said Wednesday it would reduce its bond purchases to $45 billion a month. The Fed acknowledged that first quarter growth was far weaker than expected, but added that growth had started to pick up in recent weeks.
Investors were beginning to turn their attention to the April nonfarm payrolls report due for release on Friday, which was expected to show that the recovery in the labor market was continuing.
Elsewhere, sterling was fractionally higher against the euro, with EUR/GBP edging down 0.09% to 0.8212.
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