Investing.com - The pound rose to the day’s highs on Tuesday, jumping half a percent against the dollar after data showing that the dominant UK service sector grew at a faster than expected pace in May.
GBP/USD was up 0.48% to 1.3375 by 05:15 AM ET (09:15 AM GMT), from around 1.3332 earlier.
Sterling was boosted by data indicating that the British economy is showing signs of recovering from its recent slowdown triggered by bad weather, reviving expectations that the Bank of England might raise interest rates in August.
Research firm Markit said its services purchasing managers’ index rose to 54.0 in May from 52.8 in April. Economists had forecast a reading of 52.9 on a scale where anything above 50 indicates expansion.
The improvement in service sector activity added to evidence that the economy is on course to rebound in the second quarter, but firms noted that Brexit-related uncertainty remained a key factor holding back decision making among clients.
Employment in the sector increased at the second-slowest pace since March 2017, the report said.
The pound was also higher against the euro, with EUR/GBP losing 0.42% to trade at 0.8747, down from around 0.8781 earlier.
In the euro zone, data on Tuesday showed that business activity slowed again in May. The final reading of the euro zone composite PMI fell to an 18-month low of 54.1 from April 's 55.1.
A slowdown in growth in the region since the start of the year in conjunction with a spike in political uncertainty had dampened the outlook for the euro area economy.
The euro was steady against the dollar, with EUR/USD last at 1.1694.
The U.S. dollar index, which measures the greenback’s strength against a basket of six major currencies, edged down to 93.96.