EUR forecasted to maintain advantage against the UK currency in the near-term

Richard Driver at Caxton FX says the market is clearly a little bit apprehensive ahead of Thursday’s MPC decision:

"August’s meeting minutes were not as dovish as expected and QE is unlikely to be the BoE’s next move. However, economic growth targets and more forward guidance on interest rates remain a threat to the pound.

"GBP/EUR is likely to continue to struggle in the short-term, though the reduced likelihood of the QE should limit the downside this summer. €1.1545 is the current rate."

Sterling could be in limbo until the 7th

However, we also hear from Bank of America Merrill Lynch who warn that this week's BoE decision could be completely ignored by markets, instead we will have to wait until next week:

"The minutes from the July BoE meeting stated that any announcements regarding forward guidance - including setting thresholds for intermediate indicators (such as the unemployment rate) - would be made alongside the Inflation Report on the 7 August, rather than alongside their monetary policy decision on the 1st. That could leave their decision this week somewhat in limbo, in our view."

So, we are left to focus on technical forecasts, end of month flows and PMI data when it comes to GBP.

Euro seeing widespread strength

Today is yet another good day for a host of euro exchange rates.

Boris Schlossberg at BK Asset Management says German economic strength continues to underpin the currency:

"In contrast to the Aussie the euro traded much better, holding above the 1.3250 level for most of the night. German GFK consumer confidence hit 7.0 - its best reading since 2007 as the economy in Germany continues to outperform the rest of the EZ.

"The pair remains capped ahead of the 1.3300 figure, where reported option barriers still lurk, but it is definitely well bid on the crosses with EUR/AUD rising to 1.4650 and EUR/GBP inching towards the 8700 level one again."