The pound rose off record lows against the U.S. dollar on Thursday, boosted by the release of positive U.K. manufacturing and industrial production data, although concerns over the effects of the Brexit vote on the nation’s economy continued to weigh.
GBP/USD hit 1.2999 during European morning trade, the session high and off Wednesday’s fresh 31-year lows of 1.2797; the pair subsequently consolidated at 1.2986, up 0.43%.
The U.K. Office for National Statistics said that manufacturing production decreased by 0.5% in May, better than expectations for a decline of 1.0% and following a gain of 2.4% a month earlier that was revised from an initial 2.3% advance.
On an annualized basis, manufacturing production rose at rate of 1.7%, better than forecasts for a 0.7% increase.
The report also showed that industrial production decreased by 0.5%, better than forecasts for a 1.0% decline and following a gain of 2.1% in the preceding month that was revised from the previous estimate of 2.0% growth.
Year-on-year, industrial production increased 1.4% in May, better than expectations of a 0.5% rise and after the 2.2% advance registered in April, changed from the initial reading of a 1.6% increase.
The pound had dropped to fresh 31-year lows against the greenback on Wednesday, as Britain’s shock decision to leave the European Union continued to fuel uncertainty over the consequences of the U.K. vote on the country’s economy.
Investors were now looking ahead to the Bank of England’s policy meeting next week, after BoE Governor Mark Carney signaled last week that more stimulus may be needed over the summer, sparking expectations for an upcoming rate cut.
The U.K central bank warned on Tuesday of “challenging” risks to financial stability following the Brexit vote and eased regulatory requirements on the banking sector.
BoE Governor Mark Carney said the move represented a "major change" that would help the economy to cope with the Brexit consequences.
Meanwhile, the sentiment on the greenback mildly weakened after the minutes of the Federal Reserve’s June policy meeting released on Wednesday showed that policymakers decided to keep interest rate hikes on hold as they assessed the Brexit impact.
Fed officials agreed that it was “prudent to wait” for additional data before considering another rate hike, according to minutes.
Sterling was also higher against the euro, with EUR/GBP sliding 0.52% to 0.8539, off the previous session’s 35-month high of 0.8628.