The pound lost ground against its major counterparts in early European deals on Tuesday, as UK service sector growth slowed more-than-expected in January, moving closer to stagnation, as new orders decreased for the first time in two-an-a-half years.

Preliminary data from IHS Markit showed that the CIPS Services Purchasing Managers' Index, or PMI, dropped to 50.1 from 51.2 in December. Economists had forecast a score of 51.

A PMI reading above 50 signals growth in the sector.

The latest reading was the lowest for two-and-a-half years and the second-weakest since December 2012, IHS Markit said.

The composite PMI, which combines manufacturing, services and construction, fell to 50.3 in January from 51.5 in December. Economists had forecast a score of 51.5.

The currency was trading mixed against its major counterparts in the Asian session. While it dropped against the euro and the yen, it held steady against the greenback and the franc.

Meanwhile, European shares rose with hopes for progress in U.S.-China trade talks and expectations for a pause in the Fed's rate hike cycle helping underpin sentiment.

The pound fell to 1.3014 against the greenback, its weakest since January 24. The next possible support for the pound is seen around the 1.28 level.

The pound weakened to 143.13 against the yen, from a high of 143.56 hit at 4:25 am ET. The pound is poised to target support around the 141.00 level.

The latest survey from Nikkei showed that Japan services sector continued to expand in December, and at a stronger pace, with a services PMI score of 51.6.

That's up from 51.0 in November and it moves farther above the boom-or-bust line of 50 that separates expansion from contraction.

The U.K. currency pared gains to 1.3012 against the franc, following a high of 1.3049 touched at 4:25 am ET. If the pound drops further, 1.29 is likely seen as its next support level.

The pound dropped back to 0.8777 against the euro, a pip short of a 4-day low of 0.8778 seen at 6:45 pm ET. On the downside, the pound may locate support around the 0.89 region.

Looking ahead, U.S. ISM non-manufacturing composite index for January is scheduled for release in the New York session.

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