LONDON: Sterling held firm against the dollar on Friday, as markets positioned for positive services sector data, which could help ease fears around Britain's economic recovery.
The services purchasing managers' index for April, due at 0828 GMT, is forecast at 54.2, unchanged from last month and indicating expansion in the sector.
Above forecast numbers could push the pound towards Wednesday's 2-1/2 month high hit after better-than-expected manufacturing PMI data.
Strong data could decrease the prospects of further Bank of England monetary easing and support sterling. But gains could be limited as market participants still seek to sell the pound on rallies.
Weaker numbers could pull sterling lower as they would highlight the fragile state of the British economy.
"If the pound got to around $1.56, we would probably run into a bit of selling... it is not a clear-cut case for a stronger pound. A weaker (PMI) figure will cause a bout of sterling weakness," said Neil Mellor, currency strategist at Bank of New York Mellon.
The pound was flat on the day at $1.5543, having hit a high of $1.5607 on Wednesday. Traders cited offers above $1.5585 and strong bids around $1.5480. A reported option expiry at $1.5550 could keep the currency pinned to that level.
Recent data, including growth numbers which showed the UK had avoided a triple-dip recession, helped the pound post its best monthly performance in April since October 2011.
Some analysts were sceptical about sterling's recent gains.
"We would not expect sterling to gain sustained support from a positive (PMI) reading, given the longer-term structural problems in the UK economy, which are likely to weigh on sterling. A move below $1.5420 would give a renewed bearish signal," analysts at Morgan Stanley said in a note.
The dollar's fall in recent weeks after patchy US data has helped support sterling.
The euro rose against the pound, trading up 0.3 percent at 84.30 pence. It hit its lowest in nearly three-months at 83.98 pence hit on April 26.
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