Investing.com - The pound rose to the day’s highs on Thursday after data showing that activity in the dominant UK service sector picked up at the end of 2017, although the underlying trend pointed to uncertainty over the economic outlook.
GBP/USD rose 0.22% to 1.3546 by 05:04 AM ET (10:04 AM GMT) from around 1.3538 earlier. Sterling slid 0.57% the previous day to pull back from a three-and-a-half month high of 1.3612.
Research group IHS Markit reported that its services purchasing managers’ index rose to 54.2 in December from 53.8 in November, compared to forecast for a reading of 54.1.
"However, as has been increasingly the case in recent months, the good news comes with a health warning about the sustainability of the upturn," said Chris Williamson, chief economist at survey compiler IHS Markit.
Firms reported that new order growth eased to 16-month low amid concerns over Brexit, while the rate of job creation slipped to a nine-month low. Input costs rose at the fastest rate in three months, the report said.
"Digging into the details behind the resilient strength signaled by the headline numbers, the survey data reveal an economy that is beset with uncertainty about the outlook, which is in turn dampening business spending and investment," Williamson added.
The report came after similar surveys earlier in the week showed that growth in the UK manufacturing sector cooled last month from four-year highs struck in November, but remained solid.
Meanwhile, growth in the construction sector slowed last month for the first time since September.
Taking the three sector surveys together, Britain's economy probably expanded at a quarterly rate of around 0.4% to 0.5% in the fourth quarter of 2017, the report said.
Sterling was little changed against the euro, with EUR/GBP at 0.8891.
In the euro zone, data on Thursday showed that the region’s economy ended the year with the strongest growth in nearly seven years.
The euro zone composite PMI, which measures activity across the region, jumped to 58.1 in December, up from November’s 57.5, bolstering expectations that the European Central Bank will start to wind down its stimulus program later this year.