By Adrian Lowery & Reuters

Sterling broke above the $1.63 mark today to levels not seen for more than a year after robust economic data suggested the UK could raise rates before the US.

Currency traders were encouraged to buy the pound by property market data that showed a surprise climb for UK house prices, and a slightly stronger-than-expected reading for UK manufacturing activity. That helped to push the pound to $1.633 earlier today, its strongest since January 2010, and a gain of 2 cents over the last 48 hours.
Sterling has remained near the key $1.63 level.

The UK manufacturing purchasing managers' index slipped to 61.5 in February from 62.0 in January, but the reading was higher than forecasts of 61.0. Other data showed UK mortgage approvals picked up at the start of the year.
A glut of positive economic data has helped to maintain demand for the pound in recent weeks, as speculation grew that rate-setters at the Bank of England will raise rates to control inflation.

However, official GDP figures recently downgraded the contraction in economic growth to 0.6% from 0.5% in the fourth quarter of last year, clouding the picture on the UK economy.
Nevertheless, markets are largely pricing in a 25 basis point rate rise by June, and analysts said such expectations would continue to push the pound higher.

'The BoE is going to hike rates before any of the other G4 central banks,' said Raghav Subbarao, currency strategist at Barclays Capital, adding he expected the first rate rise in May.
'None of the data today has changed that view.'

In testimony to a government committee, Bank Governor Mervyn King today reiterated his view that inflation would remain above the 2.0% target this year while the economy ekes out a modest recovery.
He added that he saw few signs that price pressures are becoming entrenched, suggesting that the central bank is not in a hurry to raise rates yet.

Deputy Governor Charles Bean said he was more concerned that elevated inflation may last longer than first thought. Investors had been focusing on Bean's comments as many in the market expect he will be the next monetary policy committee member to vote for a rate rise.

However, analysts said comments from BoE policymakers were having limited impact on sterling as they did little to add to the central bank's position that it will not rush into raising rates even as inflation pressures continue to build.
'What King has said ... is consistent with the BoE's inflation report and the MPC minutes (released last month) ... which essentially has set up the case that the BoE will be patient in hiking rates,' said Michael Derks, currency strategist at FXPro.

The BoE voted 6-3 last month to hold rates at a record low 0.5% with the camp supporting a rise gaining one more vote from the previous meeting.

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