LONDON (AFX) - Sterling was higher in midday trade after the UK Chartered Institute of Purchasing and Supply's manufacturing index unexpectedly rose above the key 50 level which signals expansion, dealers said. The index rose to 50.1 in February from a revised 46.5 in the previous month, well ahead of the consensus forecast for it to rise to 47.0. "Cable bounced up after the unexpectedly high CIPS reading," Nick Mirtchev of Halifax Group Treasury said. All the components of the index were stronger than expected, he added. "Cable has broken through the 0.42 level on the back of it," Mirtchev said. The result sparked hopes that the imbalances in the "one-legged" UK economy could finally be receding. The euro was unchanged, although it gained support earlier from a stronger-than-expected rise in the euro zone manufacturing sector purchasing managers' index. The index rose to a seasonally adjusted 48.6 in February from 46.3 in December, ahead of market expectations of a rise to 47.5. Dollar trade was subdued ahead of the flurry of US data, which kicks off at 1.30 pm with the Jan consumer spending and personal income. "People aren't rushing to take positions ahead of the data later," Mirtchev said. The recovery picture painted by recent US data is not clear cut, and many investors will await Federal Reserve Chairman Alan Greenspan's testimony next Wednesday, Mirtchev said. US equities will be monitored closely, after last night's pre-close slump weighed on the dollar, dealers said. The yen was moderately weaker as the Japanese government's continued inertia diminished any hopes of an early solution to the county's economic crisis. Japan's anti-climatic anti-deflation package released on Wednesday after widespread leaks in the media, contained little more than token gestures, according to economists. The Bank of Japan also failed to inspire the market yesterday with its promise of limitless liquidity over the fiscal year-end. The package "contains little in terms of new policies or a clear action plan to lift the economy out of its entrenched slump," S&P said, although it said the measures will do little to affect the agency's ratings for Japanese financial institutions. Crucially the measures did not address the problem of spiralling bad debts facing Japanese Banks. "They (the Japanese government) are just putting off the crisis," Will Rugg of Standard & Poor's MMS said.