LONDON Sterling hovered near a one-month high on Monday, with investors awaiting a survey on Britain's dominant services sector that is expected to show that the economy is stabilising after the shock Brexit vote in June.
The pound was also stronger against the dollar which eased after data showed U.S. jobs growth in August falling short of expectations, reducing the likelihood that the Federal Reserve will raise rates later this month. The dollar index .DXY was down 0.2 percent in London trade.
Speculators trimmed record high bets against the pound in the week ended Aug. 30 and traders expect a further boost to sterling if UK services sector purchasing managers' index beats expectations.
The index is forecast to bounce back to 50 in August from 47.4 in July when the sector contracted in the aftermath of Britain's vote to leave the European Union. ECONGB
Sterling was up 0.2 percent at $1.3313, not far from a peak of $1.3352 GBP=D4 struck on Friday. That was sterling's loftiest level since Aug. 3 and capped a third straight week of gains for the currency, its best run since April.
The euro was slightly higher at 84 pence, but not far from a four-week low of 83.76 struck on Friday. EURGBP=D4
Last week, both the construction and manufacturing sector surveys indicated a strong rebound in activity. While the manufacturing PMI jumped to a 10-month high of 53.3 in August, recovering from the three-year low it hit in July, the construction PMI rose to 49.2 from 45.9 in July.
While that was below the 50 mark dividing growth and contraction, it beat all forecasts in a Reuters poll.
"Today's PMIs will probably have to bounce back above 50 to convince the market that Brexit fears are well and truly over for now, at least, and thereby boost the pound," said Marshall Gittler, head of investment research at FXPrimus.
Sterling has performed reasonably well in the past few weeks, holding above a 30-year low of $1.2798 struck on July 8, helped by better-than-expected data that has taken the edge off concerns about a sharp decline in economic activity following British voters' decision in a June 23 referendum to leave the EU.
(Reporting by Anirban Nag; Editing by Toby Chopra)