Sterling rose to $1.3375, its highest since mid-July and up 0.6 percent on the day. It was trading at $1.3330 immediately before the data, having posted three straight week of gains last week, its best run since April this year.
The euro fell 0.4 percent to 83.56, its lowest since early August, and down from 83.89 before the survey was released. All of which saw sterling index climb to its highest since July 15.
"Services represents a key contributor to the economy and this reading should continue to ease away concerns that the EU referendum outcome would lead to an immediate recession in the U.K.," said Jameel Ahmad, chief markets analyst at FXTM.
He added sterling could rise a bit before meeting resistance at around $1.3480, the high struck on July 15.
In the past few weeks, sterling has been trading well 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.
Speculators trimmed record high bets against the pound in the week ended Aug. 30 and analysts said if investors roll back expectations of further monetary easing in coming months, sterling could advance further.
The Bank of England cut rates to near zero early last month and launched an asset purchase to cushion the economy from the shock decision to leave the EU.
"Sterling should remain supported as BoE rate expectations and the gilt curve experience a significant revaluation," Morgan Stanley said in a note on Monday.
Meanwhile, gilt futures fell by more than 10 ticks, while Britain's blue chip stock index, which tends to benefit from a weaker pound, extended losses after the survey was released.
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