Forex - GBP/USD pares gains ahead of U.S. data

The pound pulled back from session highs against the dollar on Monday as investors looked ahead to U.S. data on manufacturing activity later in the trading day.

GBP/USD pulled away from 1.5246, the session high, to hit 1.5218 during European afternoon trade, still up 0.08% for the day.

Cable was likely to find support at 1.5182, the session low and resistance at 1.5345, the high of June 27.

The pound touched session highs earlier in the session after data showed that manufacturing activity in the U.K. expanded at the fastest pace in more than two years in June.

Markit said that its U.K. manufacturing purchasing managers’ index rose to a seasonally adjusted 52.5 in June from an upwardly revised reading of 51.5 in May.

Analysts had expected the manufacturing PMI to hold steady at 51.5 last month.

Rob Dobson, senior economist at survey compiler Markit, said the data indicated that manufacturing output rose by around 0.5% over the second quarter and pointed to economic growth picking up from the first quarter’s 0.3% to at least 0.5%.

The report also made it increasing unlikely that the Bank of England would implement additional stimulus measures at its monthly meeting later in the week, Dobson said.

A separate report showed that net lending to individuals in the U.K. fell less-than-expected in May. 

The BoE said total net lending to individuals fell to GBP1.0 billion from a revised GBP1.3 billion in April. Analysts had expected net lending to increase to GBP1.4 billion in May.

The report also showed that the number of final mortgage approvals rose to 58,000 in May from 54,000 in April, above expectations for an increase to 56,000.

Investors were looking ahead to the Institute of Supply Management’s report on U.S. manufacturing activity later in the trading day amid expectations that the Fed will soon start tapering its USD85 billion-a-month bond buying program. 

Investors were also awaiting Friday’s U.S. nonfarm payrolls data, for further clues on when the U.S. central bank may decide to unwind its stimulus program.

Sterling was lower against the euro, with EUR/GBP rising 0.14% to 0.8566.

The euro was boosted after data indicated that the slump in the euro zone’s manufacturing sector is easing.

Spain’s manufacturing PMI rose to 50.0 in June, the highest level in two years, up from 48.1 in May.

France’s manufacturing PMI improved to 48.4 from 46.4 in May, but Germany’s manufacturing PMI fell to 48.6, from May's reading of 49.4.

Meanwhile, official data showed that the euro zone unemployment rate ticked up to 12.1% in May from 12% in April, compared to expectations for a reading of 12.3%.

Another report showed that consumer price inflation in the euro zone rose 1.6% in June from 1.4% in May, in line with expectations.