One day after peaking at a 2 1/2-month high of 1.4353, GBP/USD fell to a two-day low of 1.4280 on long liquidation. The pair was also undermined by poor fundamentals.
U.K. service sector activity growth declined sharply in July from June, according to the latest purchasing managers survey from the Chartered Institute of Purchasing and Supply. The headline activity index came in at 50.3, just above the key contraction/expansion level of 50, and down on the unrevised 52.1 recorded in June.
The outlook is mixed.

Support: 1.4280 (overnight low), 1.4211 (100-day moving average), 1.4137 (60-day moving average), 1.4190 (20-day moving average), 1.3911 (June 20 low), 1.3688 (June 12 low; 15 1/2-year low), 1.3660 (February 1986 trough).
Resistance: 1.4318 (overnight high), 1.4353 (Aug. 2 high; 2 1/2-month high), 1.4414 (May 21 peak).

US KEY ECONOMIC DATA/EVENTS IN THE U.S. WORLD WEEKLY FINANCIAL CALENDAR

--0830 ET: July employment report (June: Jobless rate 4.5%, non-farm payroll jobs -114,000, earnings +0.3%; Forecast: jobless 4.6%, non-farm payrolls -60,000, earnings +0.3%)
--0920 ET: Federal Reserve Bank of Dallas President Robert McTeer speaks on US-Mexican border trade and transportation to Dallas Fed conference in San Antonio, Tex.
--1000 ET: July NAPM non-manufacturing index (June: 52.1)
--1320 ET: Federal Reserve Board Governor Edward Gramlich speaks to the Texas Trade Corridors in the New Economy Conference about infrastructure and economic development in San Antonio

UPDATE OF NEWS

Euro-zone July business climate index slumps to -0.36 vs -0.03
Brussels, Aug. 3 (BridgeNews) - The European Commission's business climate indicator slumped markedly to -0.36 in July from a reading of -0.03 in June.
The Commission said the latest data were consistent with the "sharp deceleration in growth in industrial production since January." It added: "The trend in the indicator points to a deteriorating confidence of industrial firms in the euro area."

UK CIPS July services survey shows sharp fall in activity
London, Aug. 3 (BridgeNews) - U.K. service sector activity growth declined sharply in July from June, according to the latest purchasing managers survey from the Chartered Institute of Purchasing and Supply. The headline activity index came in at 50.3, just above the key contraction/expansion level of 50, and down on the unrevised 52.1 recorded in June.

Bank of France head says ECB monetary policy remains appropriate
Paris, Aug. 3 (BridgeNews) - The governor of the Bank of France and European Central Bank council member Jean-Claude Trichet defended the ECB's decision to keep interest rates unchanged. "The current orientation of monetary policy is appropriate," he said in an interview on Radio Luxembourg.
Maintaining interest rates at the current level will allow prices to fall, thus keeping inflation at bay, he said. This in turn would spur economic growth, he argued.

Halifax survey shows UK July house price growth up 9.6% on year
London, Aug. 3 (BridgeNews) - A survey by leading U.K. mortgage lender Halifax Group found house prices rose 0.7% on the month in July and 9.6% on the year. This was below the 10.9% yearly growth record in a July survey by rival mortgage lender Nationwide, and Halifax played down talk of overheating in the U.K. housing market, with its group economist predicting that house price inflation would ease in coming months.

Japan govt seeks first general budget cut in four years
Hong Kong, Aug. 3 (BridgeNews) - The Japanese Finance Ministry and the Council on Economic and Fiscal Reform, which are discussing budgetary request guidelines, are considering cutting fiscal 2001-02 (April-March) general expenditure by about 700 billion yen to around 48 trillion yen, the Nihon Keizai Shimbun reported. This would be the first time in four years that the guidelines have requested a reduction in spending, the business daily said.