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The sterling declined against the US dollar on Thursday, after a report showed the UK manufacturing activity declined in December.

Having reached a session high at 1.6604 at 05:55 GMT, the pairs highest since August 2011, GBP/USD traded at 1.6510 at 12:12 GMT, losing 0.29% for the day. Support was likely to be received at December 31st low, 1.6475, while resistance was to be met at 19th August 2011 high, 1.6618.

The market research group Markit Ecomomics, published a report, based on a survey among purchasing managers, which showed the UK manufacturing PMI declined to 57.3 in December from a reading of 58.1 in November. The value of the index, which is a gauge of UK manufacturing activity, was below median analysts forecasts of 58.4 in December.

However, recent upbeat data raised speculations that the strong housing market may spur economic recovery, while in the same time the Bank of England may have to raise borrowing costs earlier than it had previously forecast.

A report by the property researcher Hometrack Ltd., released on Monday, showed that house prices in the United Kingdom rose for an eleventh consecutive month in December, as prices may continue higher also during the next year. Home prices in England and Wales climbed 0.5% in December compared to November, while on annual basis prices surged 4.4% in December.

The yield on UK benchmark 10-year government bonds increased three basis points, or 0.03 percentage point, to reach 3.05%, after touching 3.08%, the highest since July 2011. UK gilts have fallen 4.3% in 2013, according to Bloomberg World Bond Indexes.

Meanwhile, the US dollar remained supported after a report by the Conference Board on Tuesday revealed that the US consumer confidence increased to 78.1 in December from 72.0 in November. Analysts projected that the index will increase to 76.0 in December.

The US currency was also supported after Standard & Poor’s/Case-Shiller house price index rose by an annualized rate of 13.6% in October, compared to a year ago, the strongest increase since February 2006 and above analysts’ forecasts for an increase of 13%.

The reports reinforced speculations for further stimulus tapering by the Federal Reserve. The central bank starts reducing its bond purchasing program by $10 billion to $75 billion this month on improving US economy outlook.

According to the median estimate of economists surveyed by Bloomberg on December 19th, the Federal Reserve may reduce the purchases in $10 billion increments over the next seven meetings, before ending the program in December 2014.

Later in the day, the US is expected to release the number of initial jobless claims for the week ended December 28th, as well as a report by the Institute of Supply Management on manufacturing activity.

Elsewhere, having reached a session low at 1.3716 at 08:10 GMT, EUR/USD traded at 1.3738 at 09:54 GMT, losing 0.15% for the day. Support was likely to be received at December 27th low, 1.3693, while resistance was to be encountered at December 31st high, 1.3813.

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