Investing.com - The pound inched lower against the dollar on Wednesday after soft U.K. service-sector data hit the wire, though the currency did take back earlier losses and even jumped into positive territory at times due to less-than-stellar U.S. private employment data.
In U.S. trading on Wednesday, GBP/USD was trading at 1.6327, up 0.02%, up from a session low of 1.6253 and off a high of 1.6341.
Cable was likely to find support at 1.6220, the low from Dec. 18, and resistance at 1.6344, Tuesday's high.
Sterling softened on Wednesday after data revealed that activity in the U.K.’s dominant service sector slowed unexpectedly in January.
The U.K. services PMI for January came in at seven-month low of 58.3, down from 58.8 in December. Analysts had expected the index to tick up to 59.0.
Any reading over 50 indicates expansion, which curbed the pound's losses and even helped push it in and out of positive territory at times.
Elsewhere in the U.S. the greenback firmed after the Institute for Supply Management reported that its services purchasing managers’ index came in at 54.0 in January, up from 53.0 in December.
Analysts had expected the index to rise to 53.7.
The employment component of the index rose to its highest level since November 2010.
The data eased concerns over a possible slowdown in U.S. recovery after Monday’s ISM manufacturing index showed that activity slumped to a seven-month low in January, which was partially the product of rough winter weather.
Elsewhere, payroll processor ADP reported that private-sector non-farm payrolls rose by 175,000 in December, below expectations for an increase of 180,000, which softened dollar demand, though investors concluded that a string of blizzards and bitter cold snaps may have prompted businesses to put off hiring early this year.
Friday’s official U.S. jobs report is expected to show that jobs growth rebounded in January after unseasonably cold weather in December kept gains down to 74,000.
Still the dollar didn't rally, as winter weather can slow growth at a time when the U.S. economy continues to battle headwinds and remains in need of Federal Reserve stimulus tools.
Soft economic indicators have reminded investors that the Federal Reserve will trim its USD65 billion monthly bond-buying program on a gradual basis, or even leave it on hold if need be, while policy tightening remains far off on the horizon.
Stimulus tools tend to weaken the dollar by suppressing interest rates to spur recovery.
Sterling was lower against the euro, with EUR/GBP up 0.12% to 0.8291, and down against the yen, with GBP/JPY down 0.18% as 165.64.
On Thursday, the Bank of England is to announce its benchmark interest rate.
The U.S. is to publish data on its trade balance as well as its weekly report on initial jobless claims.