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The closely watched Markit/CIPS services purchasing managers' index (PMI) rose to 58.6 in November after falling sharply to 56.2 in October, beating all forecasts in a Reuters poll, amid reports of firm demand and increased new business.
That was good news for the pound, which rose to $1.5671 from around $1.5652 before the data was released.
The euro extended losses, shedding 0.5 percent to 78.71 pence, with the single currency also under solid selling pressure ahead of a European Central Bank meeting on Thursday.
Policymakers in the euro zone are grappling with declining inflation expectations which are likely to prompt them to ease policy sooner rather than later