LONDON: Sterling hit a two-week high against the dollar and climbed against the euro on Tuesday after better-than-expected PMI data for the services sector added to speculation the UK economy may be emerging from recession.
The PMI survey for the UK's dominant services sector rose to 53.7 in August, outstripping forecasts of a rise to 51.1. The data had been due for release on Wednesday morning but was inadvertently published by Reuters a day early.
The strong data helped the pound shrug off a weaker-than-expected construction PMI survey, and cemented bets the Bank of England will keep interest rates and its quantitative easing programme on hold at its policy meeting on Thursday.
"It was a pretty decent number and just reinforces the idea that the BoE is going to be on hold for the moment," said Simon Derrick, head of currency research at Bank of New York Mellon.
"Given that the crisis in Europe is far from over that makes sterling, especially relative to the euro, a pretty solid bet."
The euro fell nearly 0.3 percent against the pound to 79.03 pence.
Sterling also jumped to a two-week high of $1.5910 versus the dollar, but stalled at strong resistance around the Aug. 23 high of $1.5912. It was last trading close to flat at $1.5883.
The pound has been underpinned in recent sessions by some better-than-expected UK data, especially from the manufacturing sector and increasing bets that the US Federal Reserve will launch another round of easing in the coming months.
ECB ACTION AWAITED
Optimism that the European Central Bank will soon take measures to stem the region's debt crisis also helped support the pound against the safe-haven dollar. The euro zone is the UK's biggest trading partner and any easing of the crisis is seen as positive for sterling, especially against the greenback.
The ECB meets on Thursday and is widely expected to announce a bond-buying programme aimed at lowering borrowing costs for Spain and Italy.
Comments from ECB chief Mario Draghi, who said central bank purchases of sovereign bonds of up to three years' maturity did not constitute state aid, added to expectations he may announce a bond-buying plan.
Some strategists said that while details of a bond-buying scheme could lift sterling against the dollar, the UK currency may slide in the short-term against the euro.
Sterling has benefited in recent months from investors keen to divert portfolio flows away from the indebted euro zone, and decisive action by the ECB could see that trend falter.
"Some of these safe-haven flows which have been coming from the euro zone are probably slowing due partially to the belief the ECB will deliver. The ECB meeting from that perspective is going to be important for sterling," said Ian Stannard, European head of FX strategy at Morgan Stanley.
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