Sterling was unable to sustain gains beyond the 0.7650 level against the Euro on Tuesday and drifted to lows around 0.7670 as sentiment remained generally weak. The UK currency was generally trapped in a 1.9810 - 1.9880 range against the dollar.
There was a further deterioration in consumer confidence with a dip in the Nationwide index to 78 in February from 81 previously and this helped push the UK currency down to lows below 1.9750 on Wednesday.
The UK PMI index for the services sector increased to 54.0 in February from 52.5 the previous month and this should provide significant near-term relief over the UK economic trends, especially given the importance of the services sector. The data will also maintain Bank of England opposition to an aggressive cut in interest rates and the bank will be looking to hold interest rates steady at this monthâ€™s meeting. The PMI data should offset pressure created by a bigger than expected cut by the Bank of Canada.
The firmer data pushed Sterling back to around 1.9800 against the dollar with a tentative recovery against the Euro.