Sterling rose against the euro on Thursday after a survey on Britain's manufacturing sector and mortgage approvals data came in above expectations, fanning talk on the possibility of higher interest rates.
The euro took a further hit later on Thursday from stronger than expected US manufacturing data that also wiped out the pound's earlier gains against the dollar.
British factory activity, as shown by the CIPS Manufacturing Purchasing Managers' Index, came in at 55.4 for February, above the consensus forecast of 53.0, and showing the fastest growth in 2-1/2 years.
At the same time, housing figures showed signs of continuing strength with approvals for new home loans rising to 120,000 in January from 114,000 in December.
"The data has given sterling a lot of protection," said Ian Gunner, head of foreign exchange research at Mellon Financial Corporation.
"Given the moves in the equity markets if we didn't have this data we could have seen sterling dropping below the key 67.60 pence level versus the euro."
Global stock markets slid on Thursday, spooked by a rallying yen as investors rushed to trim exposure to risk from yield-dependent carry trades - where low yielding currencies like the yen are used to fund purchases of higher return assets. At 1530 GMT, the euro was down 0.16 percent at 67.26 pence. Against the dollar, sterling was down 0.2 percent at $1.9599.
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