Investing.com - Sterling made modest gains against most major currencies on Tuesday following data showing stronger than expected factory performance in July and August.
At 09:48 GMT, GBP/USD was 1.3192, an increase of 0.38%. Before the Office of National Statistics released the factory output data, cable sat marginally lower at 1.3176.
According to the ONS, manufacturing production rose 2.8% in August year-on-year, beating the 1.9% consensus increase. The July rate was aso revised higher to 2.7%.
The report also showed that industrial production increased 1.6% in August, beating the forecast 0.8%, and up from the previous month’s 1.1%.
The data showed the strongest two month period for UK factories in 2017 and will add to hopes of a Bank of England rate rise when the Monetary Policy Committee meet next month.
Following a contraction in the US jobs report on Friday, and amid geopolitical concerns involving North Korea, the US dollar was broadly lower. The US Dollar Index, which measures the greenback against a trade-weighted basket of six major currencies was down 0.32% to 93.25.
The single currency made gains against the weakened dollar, EUR/USD was 1.1784, up 0.37%.
EUR/GBP was flat at 0.8932.
European focus has been turned to Catalonia. The president of the northeastern Spanish region, Carles Puigdemont, is set to make an announcement this afternoon regarding the party’s position on independence.
The pound made modest gains against safe haven currencies with GBP/JPY up 0.15% to 148.30, and GBP/CHF up 0.10% at 1.2887.
GBP/AUD reversed early morning losses to sit at 1.6957. GBP/NZD increased 0.31% to 1.8661.
GBP/CAD edged up 0.10% to 1.6507.
Investors will be watching events play out in Catalonia this afternoon, while the fifth round of Brexit talks began in Brussels yesterday.
Boris Johnson, the UK Foreign Minister, tweeted his support for the Prime Minister’s speech in Parliament on Monday afternoon, possibly hoping to put rumours of Conservative Party infighting to sleep.
Tory unity is key particularly as the October talks are supposed to resolve EU ‘divorce bill’, citizens’ rights and the Irish border. While PM May stated that the 'ball was in the EU’s court', many EU sources state that sufficient progress in these three key areas has not been made.
Trade talks will not begin until these three areas have been resolved.