(RTTNews) - The pound edged higher in early trading on Tuesday following the report showed that the U.K. service sector grew at the strongest pace in four months in July.
The headline Markit/Chartered Institute of Purchasing & Supply (CIPS) Purchasing Managers' Index rose unexpectedly to 55.4 in July from 53.9 in June. Economists were expecting the index to fall to 53.2.
New business increased in July underpinned by higher enquiry levels and improved demand. However, levels of work outstanding were down for a fourth month in succession. There was a slight drop in employment in July.
Although the U.K services PMI survey produced a better-than forecast results, traders are not expecting the Bank of England will make any changes in interest rate at tomorrow's meeting as the Monetary Policy Committee wait for the recovery to gain traction.
MPC is expected to leave the rate unchanged at 0.5 percent despite inflation in the U.K. stands at 4.2 percent, more than double the central bank's 2 percent target.
The pound appreciated by more than 2.8 percent to reach as high as 1.2769 against the Swiss franc around 5:05 am ET from early Asian session's fresh lows of 1.2404. If the pound strengthens further, it may find target around the 1.30 level. The pair is presently trading at 1.2722.
The franc fell after the Swiss National Bank decided to cut its interest rate target to curb franc's sharp appreciation.
The SNB aims to bring the three-month Libor as close to zero as possible. The bank narrowed the target range for the three-month Libor to 0.00- 0.25 percent from 0.00- 0.75 percent. Also, the bank will considerably raise the supply of liquidity to the Swiss franc money market over the next few days.
Further, the SNB intends to expand banks' sight deposits at the central bank to CHF 80 billion from around CHF 30 billion. The central bank said it will take further steps against the strength of the Swiss franc if necessary.
Against the US dollar, the pound erased its early Asian session losses and advanced to a 2-day high of 1.6410 around 5:30 am ET. The cable leveled off thereafter and is presently trading at 1.64 with 1.6470 seen as the next likely resistance level.
The pound appreciated 1 percent to reach a high of 126.67 against the yen in early trading from a 2-day low of 125.31 hit in the Asian session. On the upside, the pound may find target around the 128.20 level. As of 6:45 am ET, the pound-yen pair was quoted at 126.54.
The British currency that advanced to a fresh 2-month high of 0.8697 against the euro in late Asian deals reversed direction after the SNB intervention. However, the firmer service PMI data from the U.K. pushed the pound higher again and steadied after having reached a high of 0.8715 around 5:00 am ET.
