GBP/USD turns positive post-UK Services PMI, refreshes session tops near 1.4185 area

• GBP/USD reversed an intraday dip and turned positive for the second straight session.
• An upward revision of the UK Services PMI added to the optimistic UK economic outlook.
• A broad-based USD strength kept a lid on any further gains ahead of the US macro data.

The GBP/USD pair rallied nearly 40 pips in the last hour and refreshed daily tops, around the 1.4185 region in reaction to upbeat UK Services PMI.

According to IHS Markit, the recover in the UK services sector gained further momentum in May amid the resurgent business and consumer spending in response to looser pandemic restrictions. The final UK Services PMI was revised higher to 62.9 for May from 61.8 flash estimate, which pointed to the fastest rate of output growth in 24 years. The data validated the optimistic outlook for the UK economic recovery and provided a modest lift to the British pound.

This comes on the back of indications that the Bank of England could raise rates well into next year, which further acted as a tailwind for the sterling and remained supportive. It is worth recalling that the BoE policymaker Gertjan Vlieghe indicated last week that the central bank was likely to raise rates earlier if the economy rebounds more quickly than expected. That said, a broad-based US dollar strength kept a lid on any further gains for the GBP/USD pair.

The USD found some support from growing nervousness about whether a surprisingly stronger US economic data could force the Fed to start tapering its bond-buying program sooner rather than later. This, along with a goodish pickup in the US Treasury bond yields, further underpinned the buck. Apart from this, a cautious mood around the equity markets also benefitted the greenback's safe-haven status and might hold bulls from placing aggressive bets around the GBP/USD pair.

Market participants now look forward to Thursday's US economic docket – featuring the releases of the ADP report on private-sector employment, the Initial Weekly Jobless Claims and ISM Services PMI. The key focus, however, will remain on Friday's US monthly jobs report (NFP). In the meantime, the US bond yields and the broader market risk sentiment might influence the USD price dynamics, which might provide some trading impetus to the GBP/USD pair.

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