Investing.com - The pound pared back losses against the dollar on Thursday after data showing that growth in the dominant U.K. service sector accelerated for a third straight month to a 17-month high in December.
GBP/USD touched an intra-day high of 1.2322 immediately following the data, before pulling back to 1.2295, trading at levels seen ahead of the report's release.
The Markit services purchasing managers' index rose to 56.2 in December from November's 55.2, compared to analysts’ expectations for a reading of 54.7.
Similar surveys of the manufacturing and construction sectors earlier in the week also beat expectations.
Collectively, the PMI surveys point to the economy growing by 0.5% in the final quarter of 2016, the report said.
“A buoyant service sector adds to signs that the UK economy continues to defy widely-held expectations of a Brexit-driven slowdown,” Markit's chief business economist, Chris Williamson said.
The report also indicated that inflationary pressures are picking up with prices charged by service providers rising at the fastest pace since April 2011, due to the steep drop in sterling since the June 23 Brexit vote.
The euro pared back gains against the pound following the report, with EUR/GBP at 0.8535, up 0.29% for the day, from around 0.8543 ahead of the data.
Meanwhile, the dollar regained ground after falling overnight following Federal Reserve minutes that pointed to uncertainty over the possible impact of the incoming Trump administration’s policies on the U.S. economy.
The minutes from the Fed’s December 13-14 meeting showed that officials "emphasized their considerable uncertainty" over the policy direction of President-elect Donald Trump’s incoming administration.
Trump will take office on January 20 and has yet to outline his economic policies in detail.
The minutes also showed that policymakers assumed that Trump's promises to cut taxes and ramp up infrastructure spending could, if delivered, spur inflation which would in turn lead to a faster pace of rate increases this year.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was at 102.33, recovering from intra-day lows of 101.73.
The index hit highs of 103.81 on Tuesday, the most since December 2002, as strong U.S. factory data fed into expectations for a faster pace of monetary tightening in 2017.