The pound erased losses against the U.S. dollar on Monday, after the release of a downbeat U.S. service sector report dented demand for the greenback, although earlier U.K. data continued to weigh.
GBP/USD pulled away from 1.6338, the pair''s lowest since December 25, to hit 1.6432 during U.S. morning trade, edging up 0.09%.
Cable was likely to find support at 1.6313, the low of December 25 and resistance at 1.6533, the high of December 30.
The Institute of Supply Management said its non-manufacturing purchasing manager''s index declined to 53.0 in December from 53.9 in November. Analysts had expected the index to increase to 54.5.
The New Orders Index contracted after 52 consecutive months of growth for the first time since July 2009, falling to 49.4. However, the Employment Index ticked up to 55.8, indicating growth in employment for the 17th consecutive month and at a faster rate.
A separate report showed that U.S. factory orders rose 1.8% in November, in line with expectations, after a 0.9% fall the previous month.
The pound had weakened earlier, after Markit said the Markit/CIPS Services Purchasing Managers Index declined to a six month low of 58.8 in December from 60.0 in November. Analysts had expected an unchanged reading.
Despite the slowdown the index still remained well above the 50.0 level that indicates expansion. The report said confidence rose and the economy still looks likely to have expanded strongly in the fourth quarter.
"More strong growth looks likely as we move into 2014," Markit''s chief economist, Chris Williamson said. "It is perhaps inevitable, however, that we may see the rate of growth slow compared with the unusually strong pace seen in recent months."
Sterling was lower against the euro, with EUR/GBP adding 0.18% to 0.8291.
In the euro zone, data showed that the bloc’s services purchasing managers’ index came in at 51.0 in December, unchanged from the preliminary estimate and down slightly from 51.2 in November.
Separate reports showed that activity in Spain’s private sector expanded at the fastest rate in 77 months, but activity in France and Italy contracted last month.
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