A fresh failure to break below 0.8400

Modified: Wednesday, 28 August 2013 13:09 BST
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Meanwhile, the euro dollar exchange rate is now just 0.04 pct higher - giving away earlier gains.

For Euro / Pound today has been a battle of the PMI's

The main driver behind the euro and pound sterling today has been the relative reactions to the Manufacturing PMI data out of both the UK and Eurozone.

Boris Schlossberg, BK Asset Management tells us both beat expectations; but a strong GBP/EUR reflects a bigger surprise out of the UK:

"In UK the PMI Manufacturing data suprised to the upside rising to 51.3 from 50.3 eyed. This was the second consecutive month of 50-plus readings indicating that the UK Manufacturing sector is starting to recover. The new orders index rose to 53.7 - a 26 month high. The news proved positive for cable, lifting the pair to a high of 1.5289 before easing a bit towards 1.5260.

z"In Europe the latest PMI data also showed an improvement. Although the headline readings remained below the 50 boom/bust line, they nevertheless rose to 48.3 from 47.8 with some of the periphery economies registering multi month highs. That encouraged investors and EUR/USD rose above the 1.3000; level trading at 1.3025 in moring European dealing."

The longer term outlook for sterling is technically challenging

Setting aside today's data we note that EUR/GBP remains caught in a tight range - any advances for sterling would be reliant on the breaking of a key technical level.

Leander Dreyer at KBC Markets gives us his verdict on sterling's outlook against the euro:

"On Friday EUR/GBP to a large extent copied the price pattern in the EUR/USD headline pair. In a daily perspective, the pair lost some ground but basically the pair is still holding the sideways trading pattern in the mid 0.85 area.

"A sustained drop below 0.8400/0.8390 is needed to improve the picture for sterling. This level was already tested several times over the past two months as the ECB clearly reinstalled an easing bias and reduced its policy rate to 0.50%.

"However a sustained break didn’t succeed and the pair settled in a sideways consolidation pattern between 0.8400 and 0.8600. ECB policy will remain very accommodative in the foreseeable future. On the other hand, there is a lot of uncertainty on the UK policy framework once the new Governor Carney will start his job as BoE Chairman in July. For now we don’t see a big case for a break either way. We continue to play the range."