Investing.com - The pound was lower against the dollar on Wednesday after data showed that the rate of expansion in the U.K. service sector slowed slightly in January, following exceptionally strong growth in previous months.
GBP/USD was down 0.28% to 1.6277 from 1.6298 ahead of the data.
Cable was likely to find support at 1.6130, the low of November 25 and resistance at 1.6340, the session high.
The drop in sterling came after Markit said the U.K. services purchasing managers’ index for January came in at seven-month low of 58.3, down from 58.8 in December. Analysts had expected the index to tick up to 59.0.
The report said new business levels fell but employment growth accelerated at the start of the year, as firms gained confidence in the economic outlook.
“Even with the easing seen in January, the sector is still expanding at a rate that bodes well for another strong GDP reading in the first quarter. Taken together, the three PMI surveys are signaling quarterly GDP growth of 0.8%,” said Chris Williamson, chief economist at survey compilers Markit.
“The survey also suggests that inflationary pressures and wage growth remain muted, which provides policymakers with extra leeway to keep policy loose for longer while the economy continues its recovery” he added.
Demand for the dollar continued to be underpinned as investors remained wary ahead of monetary policy decisions by the Bank of England and the European Central Bank on Thursday, and Friday’s U.S. nonfarm payrolls report.
The BoE is not expected to announce any changes to monetary policy but the decision will be closely watched in case it updates its forward guidance on rates.
Elsewhere, sterling was lower against the euro, with EUR/GBP up 0.28% to 0.8303.
The euro remained under pressure after data last week showing that the annual rate of euro zone inflation slowed in January fuelled fears that the ECB may tighten policy to stave off deflation.