Investing.com - The pound rose to three week highs on Wednesday after data showing that the dominant U.K. service sector posted another solid rise in output in January, getting 2016 off to a strong start.
GBP/USD hit 1.4462, the most since January 13, up from around 1.4430 ahead of the data.
The Markit services purchasing managers’ index ticked up to a five month high of 55.6 from Decembers 55.5. Analysts had expected a slight downtick to 55.3.
New business rose at the sharpest rate since last July, the report said, while service providers raised employment at the fastest pace since last October.
But output growth was weaker than the trend rates achieved in 2013, 2014 and 2015 and the longer-term outlook for business activity hit a three-year low.
“The three PMI surveys for January collectively point to a slight upturn in the rate of economic growth, consistent with GDP rising at a quarterly rate of 0.6% in the first quarter, up from 0.5% in the fourth quarter, if current levels are sustained,” Chris Williamson, chief economist at Markit said.
“Despite the uptick in growth, the increased uncertainty about the outlook and persistent lack of inflationary pressures means the majority of policymakers will no doubt be more worried about avoiding another downturn than whether the economy needs higher interest rates.”
Sterling remained higher against the euro, with EUR/GBP down 0.34% at 0.7552.
In the euro zone, data on Wednesday showed that business activity slowed to a four month low in January, adding to pressure on the European Central Bank to take fresh measures to shore up growth.
The composite euro area PMI, which measures manufacturing and service sector activity, slid to 53.6 in January from 54.3 in December.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was steady at 98.84 as investors looked ahead to U.S. data on private sector hiring and service sector activity later in the day.
Investors were also beginning to turn their attention to Friday’s U.S. nonfarm payrolls report for possible indications on the path of U.S. interest rates hikes this year.