The pound declined towards a seven-week low against the US dollar, as data showed the activity in the UK services sector expanded at a slower-than-expected pace in January.
GBP/USD hit a session low at 09:57 GMT, after which consolidation followed at 1.6274, losing 0.31% for the day. Support was likely to be received at February 4th low, 1.6258, also the pairs weakest since December 17th, while resistance was to be encountered at February 4th high, 1.6344.
A report by the market research group Markit, in cooperation with the UK Chartered Institute of Purchasing and Supply, revealed a gauge which tracks the activity in the UK services sector slowed down to 58.3 in January, defying analysts projections of an increase to 59.1. Januarys reading was also the weakest in seven months, while in December the index, which is based on a survey among purchasing managers, stood at 58.8. The index is closely watched by investors, as it can be seen as a leading indicator of the overall economic performance, due to the early access to company data by the purchasing managers.
Following the release of the report, the sterling came under heavy selling pressure.
However, yesterday the UK Chartered Institute of Purchasing and Supply reported today that its index of construction output, based on a survey among purchasing managers, soared to 64.6 in January, defying analysts’ expectations for a decrease to 61.5 from December’s reading of 62.1. January’s reading was the strongest since August 2007.
Bank of England is expected to conclude its two-day policy meeting tomorrow, after which the central bank will announce its interest rate decision, accompanied by a decision on the amount of monthly stimulus.
Meanwhile, private sector in the United States probably added 185 000 new jobs in January, following a job gain of 238 000 in December. The official figures are to be released by the Automatic Data Processing Inc. (ADP) at 13:15 GMT today. Better than expected figures will certainly provide support to greenback’s demand.
On the other hand, activity in the services sector in the United States probably increased in January, with the corresponding PMI climbing to a reading of 53.7, after a month ago the index came in at a value of 53.0. The Institute for Supply Management (ISM) will announce the official reading at 15:00 GMT today.
Elsewhere, AUD/USD slipped to a session low at 0.8874 at 3:45 GMT, after which consolidation followed at 0.8892, falling 0.22% for the day. Yesterday the pair reached 0.8942, or the highest level since January 15th, while recording a 1.87% daily advance, or the most since June 3rd 2013. Support was likely to be received at February 4th low, 0.8731, while resistance was to be encountered at February 4th high, 0.8942.
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