Amid growing signs that a recovery in the U.K. economy is gaining momentum, one currency strategist says the best way to position for the rebound is to sell the euro against sterling.
Data on Thursday showed the U.K. manufacturing sector in June grew at its fastest rate for more than two years and Adam Cole, head of currency strategy at RBC, said the activity data followed a consistent theme where depressed expectations were not hard to beat.
(Read more: Investors 'Washed Out' as Sterling Hits 3-Year Low)
"For this reason, the underperformance of sterling, that you have seen over the last month is something to be bought into, selling euro/sterling in particular is a trade that we like at these levels," said Cole.
The euro was trading at about £0.8685 on Thursday, down almost 0.7 percent on the day, but still up about 1.6 percent from where it traded a month ago.
The Markit/CIPS Manufacturing Purchasing Managers Index (PMI) jumped to 54.6 in July from an upwardly revised 52.9 in June. Manufacturing production increased for the fourth month running, as growth of new orders continued to strengthen.
(Read more: Forward guidance? Sterling could be about to fall)
The pound posted a modest gain against the euro and the dollar as U.K. manufacturing climbed by more than expected and as the Bank of England left interest rates on hold on Thursday.