Investing.com - The pound held gains against the dollar on Monday after data showing that U.K. factory activity grew at the fastest rate in three months in January, pointing to a modest improvement at the start of 2016.
GBP/USD was up 0.43% at 1.4304 little changed from ahead of the data.
Markit said that its U.K. manufacturing purchasing managers’ index rose to 52.9 from December’s 52.1, compared to expectations for a downtick to 51.8.
On the index, a reading above 50.0 indicates industry expansion, below indicates contraction.
Manufacturing output accelerated to a 19-month high the report said, but new export orders fell as the strong pound weighed and firms cut staffing levels.
Factory gate prices were lower for the fifth month amid ongoing weakness in commodity prices.
“Subdued growth, rising global headwinds and a lack of inflationary pressure provide further cause for the Bank of England to push its first rate increase into the back and beyond of 2016,” Rob Dobson, senior economist at survey compiler Markit said.
The euro remained lower against the pound, with EUR/GBP at 0.7588 from 0.7588 earlier.
The single currency remained on the back foot after data showing that growth in the euro zone manufacturing sector slowed last month, adding to fears over the risk of deflation in the region.
The euro zone manufacturing PMI dipped to 52.3 in January, down from 53.2 in December.
The euro was also under pressure as the Bank of Japan’s unexpected decision to cut its deposit rate into negative territory on Friday was seen as increasing the likelihood of further easing by the European Central Bank.
The soft euro zone factory data came after a report earlier Monday showing that manufacturing activity in China contracted for a sixth straight month in January.
The Chinese manufacturing PMI slid to 49.4 from 49.7 in December, falling further below the 50 level separating contraction from growth.
A separate report showed that China’s Caixin factory PMI ticked up to 48.4 from 48.2 in December, indicating that the world’s second largest economy got off to a weak start in 2016.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 99.51, holding below Friday’s highs of 99.88.