Investing.com - The pound remained near five-year highs against the U.S. dollar on Tuesday, as disappointing U.S. trade balance data weighed on demand for the greenback, while a strong U.K. service sector report continued to support sterling.
GBP/USD hit 1.6995 during U.S. morning trade, the pair's highest since August 2009; the pair subsequently consolidated at 1.6994, climbing 0.75%.
Cable was likely to find support at 1.6866, the session low and resistance at 1.7042.
Official data showed that the U.S. trade deficit narrowed to $40.38 billion in March, from $41.87 billion in February, whose figure was revised from a previously estimated deficit of $42.30 billion. Analysts had expected the trade deficit to narrow to $40.30 billion in March.
Demand for sterling strengthened earlier, after Markit said the U.K. services purchasing managers' index rose to a four-month high of 58.7 last month, from a reading of 57.6 in March. Analysts had expected the index to remain unchanged in April.
The upbeat data added to expectations the Bank of England could raise borrowing costs ahead of other central banks.
Sterling was higher against the euro, with EUR/GBP shedding 0.33% to 0.8199.
In the euro zone, official data showed that retail sales rose 0.3% in March, confounding expectations for a 0.2% fall. Retail sales in February were revised down to a 0.1% gain from a previously estimated 0.4% increase.
The report came after official data showed that the number of unemployed people in Spain dropped by 111,600 in April, compared to expectationd for a decline of 49,100, after a 16,600 fall the previous month.
Separately, Markit research group said that Spain's services PMI rose to a six-year high of 56.5 last month, from a reading of 54.0 in March. Analysts had expected the index to tick up to 54.4 in April.
Italy's services PMI swung back into expansion territory last month, rising to 51.1 from a reading of 49.5 in March, beating expectations for an uptick to 50.4.