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Pound Strengthens Against Most Majors On Upbeat UK Services PMI Data

The pound outperformed against most of its major opponents in early deals Tuesday as the British service sector rebounded in January after shrinking in the previous month.

The seasonally adjusted purchasing managers' index (PMI) for the service sector came in at 51.5 in January, data from a survey by Markit Economics and the Chartered Institute of Purchasing and Supply (CIPS) showed today.

A figure above 50 indicates expansion in the sector, while one below suggests decline. The headline index was well-above economists forecasts, who had expected a reading of 49.5.

Meanwhile, the British Retail Consortium and KPMG reported that same store sales in the United Kingdom improved 1.9 percent in January compared to last year on a like-for-like basis.

The pound touched 146.98 against the yen following the data, highest since January 2010. The pound-yen pair is expected to cross the 148.50 level on the upside, at which the 23.6 percent retracement target lies in the weekly chart.

The yen eased amid news that the Bank of Japan Governor Masaaki Shirakawa announced his intention to resign three weeks ahead of schedule.

Shirakawa told reporters in Tokyo that he would step down on March 19. The governor's term expires on April 8, 2013. He has been holding the post since April 2008.

The pound advanced to 4-day highs of 1.5807 against the US dollar and 1.4369 against the Swiss franc after the UK data. However, the sterling's present advance does not look to have a solid one as the overall technical picture shows the extension of bearish trend in both pairs.

Probable resistance level for the cable is seen at 1.5860, while the likely support is visible at 1.57. For the GBP/CHF cross, 1.4440 is seen as the next barrier on the upside and a re-test of 1.42, last week's fresh 11-month low, is seen as the immediate support.

Switzerland's trade surplus rose to a new record high in 2012, helped by strong exports to North America and Latin American nations, a report from the Federal Customs Administration showed today.

The trade balance resulted in a surplus of CHF 24.4 billion last year, higher than CHF 23.5 billion in 2011. Exports to North America and Latin America jumped 10 percent over the year.

In 2012, however, total exports fell 0.2 percent from 2011 in real terms to CHF 200.9 billion. Imports rose 0.6 percent to CHF 176.5 billion.

The pound pulled back to near the 0.86 level against the euro, falling as low as 0.8598 from a multi-day high of 0.8554. If the pound extends downtrend, 0.87 is seen as the next likely support level.

The common currency was under pressure after a report showed that the eurozone retail sales fell more than expected in December, by 0.8 percent from a month ago.

The decline was sharper than the 0.1 percent fall logged in November and a 0.5 percent drop forecast by economists.

At the same time, the Eurozone private sector contracted at a slightly slower than estimated pace in January, Markit Economics said today.

The final composite output index rose to a ten-month high of 48.6 in January and came in above its earlier flash estimate of 48.2. The index climbed from 47.2 in December.

Likewise, the final services Purchasing Managers' Index rose to 48.6 from 47.8 in December. Also, the reading was above the flash estimate of 48.3.

Looking ahead, the ISM non-manufacturing data for January is expected in the North American session.

by RTT Staff Writer

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