Sterling soared above $1.32 against the dollar on Thursday after U.K. manufacturing data for August showed one of the sharpest rebounds ever. The currency jumped 0.9 percent from an earlier $1.3152. But analysts have warned that this correction is likely temporary.
U.K. Manufacturing PMI rose to 53.3 in August, up from 48.3 in July – one of its lowest level since February 2013 as Brexit uncertainty knocked sentiment in the sector. The five point month-on-month jump in the Markit PMI was the joint biggest rise in the index's 25 year history.
The better-than-expected numbers pushed sterling higher with the markets expecting a rebound of sterling. However some analysts believe the bounce could be short-lived.
"In the near-term, while we are seeing sterling gaining we would view the correction as likely temporary, not least as the data will embolden those within government looking for a hard Brexit, ignoring the single market," Jeremy Stretch, Head of G10 FX Strategy, CIBC Capital Markets told CNBC via email.
He further warned that sterling may have a tough ride ahead. "We would expect that the trough in sterling has yet to be seen and may not be occur until Article 50 is triggered."