Investing.com - The pound held on to modest gains against the dollar on Wednesday after data showing that growth in the U.K. service sector slowed more than expected last month, indicating that the economic recovery may be losing momentum.
GBP/USD was 0.09% higher at 1.5576 from around 1.5589 ahead of the data.
The Markit U.K. services purchasing managers' index fell to 57.4 in July from 58.5 in June, compared to expectations for a reading of 58.0.
Hiring in the sector eased to its slowest pace since March 2014, the report said.
Taken together with surveys of the manufacturing and construction sector earlier this week the reading points to economic growth of 0.6% in the third quarter, Markit said, down slightly from 0.7% in the three months to June.
Sterling remained supported as investors looked ahead to Thursday, when the Bank of England will announce its latest interest rate decision; publish the minutes of the monetary policy meeting; and present the latest quarterly forecasts for economic growth and inflation.
The three events had been held separately previously.
The pound remained higher against the euro, with EUR/GBP down 0.29% to 0.6971.
In the euro zone, data on Wednesday showed that private sector growth eased in July, as the euro area composite index fell to 53.9 from June’s four year high of 54.2.
Another report showed that retail sales in the region fell by a larger than forecast 0.6% in June.
Demand for the dollar continued to be underpinned after a Federal Reserve Bank official indicated support for a September interest rate hike on Tuesday.
The dollar strengthened across the board after Atlanta Fed President Dennis Lockhart said it would take a “significant deterioration in the economic picture” for him to not support a rate hike in September.
The comments came in an interview with The Wall Street Journal.
Investors were turning their attention to the upcoming U.S. jobs report for July, which could reinforce expectations for higher interest rates.
The latest government nonfarm payrolls report, which was due to be released on Friday, was expected by economists to show that the economy added 215,000 new jobs last month.
Monthly jobs gains above 200,000 are seen by economists as consistent with strong employment growth.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.18% to 98.21.