(Updates at 1150 GMT)

By Kevin Buckland and Alun John

TOKYO/LONDON, Aug 22 (Reuters) - Business activity data

helped lift the pound to a new 13-month high against the dollar

on Thursday and kept the euro just shy of a similar peak, with

the equivalent U.S. numbers and jobless claims figures to come

later in the day.

Sterling rose 0.21% to $1.3129, its highest since

July 2023. Should it squeeze past the $1.3143 hit then, the

British currency would be at its highest since April 2022.

The euro was down 0.1% at $1.1137, on slightly

softer euro zone data and slowing wage growth, but still near

the $1.11735 reached on Wednesday, its firmest since July 2023.

Both currencies have been supported in recent weeks by

weakness in the dollar as a dovish Federal Reserve and fresh

signs of weakness in the U.S. jobs market back the case for

interest rate cuts.

Markets are now pricing in more rate cuts from the Federal

Reserve by year-end than for the European Central Bank or Bank

of England.

But it was developments in Europe that were to the fore on

Thursday, with Britain's composite purchasing managers index

(PMI) rising to 53.4 in August, the highest reading since April

and above expectations.

Readings above 50 denote growth. The euro zone composite

figure rose to 51.2, also above expectations, though analysts

said the number was flattered by a rise in French services

activity due to the Olympics.

Data also showed that euro zone negotiated wage growth

slowed sharply last quarter, which Bert Colijn, ING's senior

economist for the euro zone, said would pave the way for an ECB

rate cut in September.

"The European Central Bank has remained uncomfortable with

cutting interest rates while wage growth is elevated. Today's

drop will bring some relief for those looking for a gradual

cutting cycle," Colijn said in a note.

He also said the PMI data would give hawks little reason to

object to a September cut.

FED FOCUS

The dollar was 0.55% firmer against the yen at 146.1, with

the rate sensitive currency pair supported by a move

higher in U.S. Treasury yields.

That left the dollar index, which measures the

greenback against a basket of currencies including the euro,

sterling and yen, up 0.2% at 101.34.

The index dipped to 100.92 on Wednesday for the first time

this year, softening as markets become more confident the Fed is

on track for rate cuts starting in September.

Traders now price in a 30% probability of a 50 basis point

(bp) cut at the central bank's Sept. 17-18 meeting, and are

fully pricing a 25 bp reduction, according to the CME Group's

FedWatch Tool.

But Fed policy maker Jeff Schmid, sounded a cautious tone in

Thursday remarks that did not point to a large move.

Rates are not overly restrictive and policy makers have room

to consider where to go from here, he said.

Weekly U.S. jobless claims data is due later on Thursday and

Fed Chair Jerome Powell will deliver a hotly anticipated speech

at the central bank's annual Jackson Hole symposium on Friday.

Other central bankers, including Bank of England governor

Andrew Bailey and ECB chief economist Philip Lane, will also

speak at Jackson Hole, while Bank of Japan Governor Kazuo Ueda

will testify on Friday in a special session of parliament that

will scrutinise the BOJ's decision to unexpectedly raise rates

at the end of last month.

Ueda's hawkish stance helped spur a rapid unwind of bearish

yen positions and a violent sell-off in Japanese stocks.

Elsewhere, the Swiss franc was somewhat firmer, with the

dollar down 0.16% at 0.8504 francs while the Australian dollar

was flat at $0.6745.