Sterling ground out some gains against the euro on Wednesday after a survey of service sector sentiment underlined the positive view of the British economy that has underpinned the pound this year but failed to drive it significantly higher. The PMI survey of purchasing managers came in at 58.2, still way above the 50 mark that separates economic expansion from contraction and a touch above forecasts for 58.0.
Sterling also gained 0.4 percent to $1.6727 after a jobs report added to a weaker-than-expected run of US data that, while largely put down to a harsh winter, has helped delay the march higher for the dollar expected by many this year. "Although this morning's PMI services number was the lowest since last July and was just marginally higher than expected, it's been received relatively well," said Jonathan Pryor, head of FX dealing at Investec Corporate and Institutional Treasury.
"It stayed afloat at impressive levels despite the risk that the recent terrible weather would dampen the outlook and the record high for the employment component was particularly encouraging." The pound gained almost half a percent against the euro
but was still firmly in recent ranges at 82.10 pence. Against the dollar it has traded between $1.6583 and $1.6769 for the past two weeks, just below four-year highs above $1.68 hit earlier in February, and some analysts say it may be close to hitting a ceiling.
The pound was the biggest gainer among major currencies in the second half of last year, rising around 10 percent against the dollar but has struggled to maintain that pace in 2014.
"The big picture is that the growth story now seems fully priced in and other economies are growing as well," said Graham Davidson, a trader at NAB in London. "I tend to think that sterling should tend to come off."
Many are convinced the bulk of inflows from a sale of US assets by Vodafone has already passed through the market - seen as a supportive factor in recent weeks - but the macroeconomic data continues to support the pound.