Dollar higher ahead of U.S. manufacturing data; Sterling hits three-week lows

On Monday the dollar remained broadly higher vs its rivals boosted by mounting expectations for a U.S. rate hike in the coming months and as markets awaited data on U.S. manufacturing activity.

The U.K. currency meanwhile hit a three-week trough as data indicated that the U.K. manufacturing sector grew at a slower pace than economists had estimated. Fears of "Brexit" also put sentiment for the pound under pressure.

The dollar remained supported even after data showed that the U.S. economy contracted in the first quarter, as recent indications of a rebound in growth continued to fuel expectations for higher interest rates.

The U.S. Commerce Department said that the country's gross domestic product contracted at an annual rate of 0.7% in the first three months of the year, instead of the initial estimate of 0.2% growth. It was still better than economists’ forecast of a 1% contraction.

EUR/USD dropped 0.50% to 1.0934 as concerns over the possibility of a Greek debt default dampened sentiment for the euro.

Separately, data on Monday showed that the euro zone manufacturing purchasing managers' index (PMI) came in at 52.2, unchanged from March’s final reading and a 10-month high, but down slightly from the preliminary estimate of 52.3.

France’s manufacturing sector still in decline and Germany registering only modest growth which added to weakness in the region's overall growth.

Markit’s factory PMI for the entire 19-nation euro region rose to 52.2 in May from 52 in April. While that’s above the key 50 mark that divides expansion from contraction, it’s below the initially reported reading of 52.3.

The pound was lower, with GBP/USD sliding 0.44% to 1.5218 after the Markit U.K. manufacturing PMI rose to 52.0 in May from a downwardly revised 51.8 in April, but came in below forecasts of 52.5.

The data added to expectations that the Bank of England will leave interest rates unchanged for longer.