The pound rose against the dollar for the first time in almost a week, in line with a retreat in the U.S. currency, and after a survey showed UK business activity was less subdued than initially feared in September.
The final reading of S&P Global UK Services Purchasing Managers' Index (PMI) fell in September to 49.3 from 49.5 in August, further below the 50 threshold for growth.
The reading was an eight-month low, but it topped a preliminary reading of 47.2 that shocked investors earlier in September.
The final PMI included responses from companies surveyed from Sept. 20 to Sept. 27 - days after data showed British inflation fell unexpectedly in August, as well as the Bank of England's surprise decision to leave interest rates unchanged on Sept. 21.
With inflation cooling and concerns rising over a prolonged economic slowdown, the market is convinced that the BoE has reached the end of its hiking cycle, which is keeping pressure on the pound.
Money market traders believe there is a 22% chance of another rate hike from the BoE this year, but this would likely be the last increase for this monetary policy cycle.
