The GBP fell to session lows against the dollar on Tuesday, as concerns over the outlook for the U.K. economy weighed despite data showing that the U.K. service sector expanded at the fastest pace in four months in January. GBP/USD hit 1.5728 during European afternoon trade, the session low; the pair subsequently consolidated at 1.5736, shedding 0.16%. Cable was likely to find support at 1.5726, the session low and resistance at 1.5850, the high of January 24. The Markit U.K. services purchasing managers’ index rose to 51.5 last month from a reading of 48.9 in December and beat expectations for a reading of 49.8. Concerns over the outlook for growth have weighed on sterling in recent weeks after data last month showed that the U.K. economy contracted by 0.3% in the three months to December. The upbeat data increased the chances that the Bank of England would hold off on announcing any changes to its current easing program at the outcome of its upcoming policy meeting on Thursday. The report came after data showed that the euro zone’s final services PMI improved to a 10-month high of 48.6 in January from a final reading of 47.2 the previous month, adding to signs of recovery in the region. The data overshadowed concerns over political uncertainty in Spain and Italy which pushed peripheral borrowing costs higher on Monday and drove the single currency from 14-month highs against the dollar. A separate report showed that euro zone retail sales dropped 0.8% in December, worse than expectations for a 0.5% fall, while November’s figure was revised lower. The pound was lower against the euro, with EUR/GBP rising 0.30% to 0.8598.
EasyForexNews Research Team