Sterling Holds Steady Amidst UK Services Growth

Sterling remained stable after a survey revealed rapid growth in the UK's services sector in August. The pound remained flat at $1.3115, close to a two-week low. The S&P Global UK Services PMI rose to 53.7 from 52.5 in July, indicating economic momentum. Traders are predicting interest rate cuts from the Federal Reserve and the Bank of England.

Sterling held steady on Wednesday after a survey showed Britain's services activity grew last month at the fastest pace since April, adding to signs of momentum in the economy. The pound was flat at $1.3115, hovering near a two-week low touched in the prior session. The currency has eased somewhat after a stunning rally in August that pushed it to its strongest level in more than two years.

The S&P Global UK Services Purchasing Managers Index rose in August to 53.7 from 52.5 in July, above a preliminary estimate of 53.3. The survey, which also pointed to easing price pressures, followed a poor reading on U.S. manufacturing activity which knocked global stocks lower ahead of monthly U.S. payrolls data on Friday.

Traders are pricing in just over 100 basis points of interest rate cuts from the Federal Reserve by the end of the year, and about 39 bps, or at least one more cut, from the Bank of England this year. Britain's central bank cut borrowing costs last month for the first time since March 2020, to 5.0% from a 16-year high of 5.25%.

'We think sterling can grind higher but with greater unwind risk because of how stretched positioning is,' said Alex Jekov, head of G10 FX strategy at BNP Paribas. The euro edged up against the pound at 84.275 pence, rising for a fourth consecutive day after having hit a one-month low late last week.

HCOB's composite PMI for the euro zone, compiled by S&P Global and seen as a good gauge of overall economic health, jumped to 51.0 in August from July's 50.2.

(With inputs from agencies.)