Forex - GBP/USD gains as U.K. service-sector report surprises

The pound traded higher against the dollar on Wednesday after a widely watched U.K. service-sector report surpassed market expectations.

Meanwhile, uncertainty over the possibility of U.S. military strikes against Syria and edginess ahead of the release of Friday's August jobs report repelled investors away from the greenback.

In U.S. trading on Wednesday, GBP/USD was trading at 1.5630, up 0.45%, up from a session low of 1.5556 and off from a high of 1.5647.

Cable was likely to find support at 1.5506, Monday's low, and resistance at 1.5718, the high from Aug. 21.

The Markit U.K. services purchasing managers’ index rose to 60.5 in August, the highest since December 2006, from 60.2 in July. The numbers defied consensus forecasts, as analysts were calling for a decline to 59.0.

The report, which came a day before the Bank of England unveils its latest decision on interest rates, said new business grew for the eighth successive month and added the latest increase was the largest seen in more than 16 years, fueling expectations that U.K. recovery is gaining steam.

The dollar, meanwhile, came under pressure amid uncertainty over whether the U.S. will launch military strikes against Syria.

U.S. President Barack Obama has asked for a Congressional nod to begin limited strikes against Syria for its alleged use of chemical weapons, though he said earlier Wednesday that he does not need approval to strike, which softened dollar demand.

Russian President Vladimir Putin said earlier he might support a U.N. Security Council resolution calling for military strikes provided that body was presented with conclusive proof that the Syrian government employed chemical weapons.

Putin insisted the U.S. had no right to strike Syria, a Russian ally, adding only the U.N. can authorize such a measure.

Investors remained eager for the release of Friday’s U.S. nonfarm payrolls report, which is seen as a tipping point over whether the Fed will begin tapering asset purchases this month.

Many investors expect the Federal Reserve to announce plans to unwind its USD85 billion monthly bond-buying program at its Sept. 17-18 policy meeting.

Monthly asset purchases weaken the dollar to spur recovery.

Elsewhere, the U.S. Commerce Department reported that the U.S. trade deficit widened more than expected in July, hitting USD39.1 billion from a downwardly revised USD34.5 billion deficit in June, mainly due to improving imports. 

Analysts were expecting the trade deficit to widen to USD38.7 billion in July. 

The pound, meanwhile, was up against the euro and up against the yen, with EUR/GBP down 0.11% at 0.8454 and GBP/JPY up 0.59% at 155.90.

On Thursday, the U.S. is to release the ADP nonfarm payrolls report on private-sector job creation, as well as the weekly government report on initial jobless claims.

Investors will also remain eager for the Bank of England's announcement on interest rates and monetary policy.