By Alun John
LONDON (Reuters) - Data showing British businesses recorded their fastest growth in activity in nearly a year helped the pound steady against the dollar on Tuesday, after touching its lowest in five months the day before, but it remained under pressure against the euro.
The pound rose as much as 0.3% against the dollar after the data was released, but failed to hold those gains and was last just in positive territory.
Still, after three successive days of declines to as low as $1.2299, its weakest since November, this at least marked a stabilisation.
The S&P Global UK Composite Purchasing Managers' Index for the services and manufacturing sectors jumped to an 11-month high of 54.0 in April from March's 52.8, above all forecasts in a Reuters poll of economists.
The gain was led by an big rise in services.
European data was also better than expected and the common currency at one point rose 0.2% against the pound to 86.43 pence, matching its previous day's three-month high, though these moves also failed to hold.
Euro/sterling has traded in a tight range for months, but broke out on Friday when the euro climbed 0.65% after Bank of England Deputy Governor Dave Ramsden said the risk of British inflation getting stuck too high had receded and it might prove weaker than the BoE's most recent forecasts.
Also speaking last week, Governor Andrew Bailey said next month's inflation numbers were on track for a sharp drop towards the central bank's 2% target.
Huw Pill, the central bank's chief economist, speaks later on Tuesday.
"(Ramsden's comments) indicated that the leadership at the Bank of England is turning more dovish, that increases the risk of them cutting rates sooner, maybe as soon as the June MPC meeting," said Lee Harman senior currency analyst at MUFG.
"That more dovish outlook is starting to have an impact on the pound."
Expectations that the Bank of England would cut rates later than the Federal Reserve and ECB had supported the British currency earlier in the year. But recent stronger U.S. inflation data means markets don't see U.S. rate cuts until much later in the year.