Forex – Sterling Shrugs off UK Manufacturing Slowdown – Sterling held gains against the dollar on Thursday despite data showing that UK factory grow eased to a seven month low in January as output and new orders slowed.

GBP/USD was up 0.40% at 1.4245 by 05:04 AM ET (10:04 AM GMT), holding below a session high of 1.4274.

Research firm Markit reported that the UK manufacturing purchasers’ index dropped to 55.3 in January, down from December’s 56.2.

Economists had forecasts a reading of 56.5.

That shows that growth slowed, but still remained above the long-term average.

The report said that output growth and new order growth both weakened last month, while raw material costs spiked — pushing input costs up and forcing firms to raise prices.

“The UK manufacturing sector reported an unwelcome combination of slower growth and rising prices at the start of 2018,” said Rob Dobson, director at survey compiler Markit.

“The trend in demand will need to strengthen in the near-term to prevent further growth momentum being lost in the coming months,” he added.

Demand for sterling continued to be underpinned by continued weakness in the dollar and optimism about Britain’s economy as well as the prospect of a Brexit deal that is more favourable to the UK.

Sterling was a touch higher against the euro, with EUR/GBP down 0.13% to 0.8735.

In the euro zone, data on Thursday showed that factory growth remained strong in January.

The euro zone manufacturing PMI came in at 59.6, down slightly from December’s record high of 60.6.

Elsewhere, the euro was higher against the dollar, with EUR/USD rising 0.27% to 1.2446, not far from the more than three year peaks of 1.2537 reached last week.

The dollar slid lower against a currency basket, but remained above last week’s three year trough after the Federal Reserve left the door open for a March rate hike at the conclusion of its meeting on Wednesday.

The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, slid 0.12% to 88.82, holding above last week’s low of 88.25, its weakest level since December 2014.