EUR Flops Against Majors

In Europe the PMI readings were also better than forecast with the final PMI reading coming in at at 50.3 versus 50.1 eyed.

"The EUR/USD however slid lower for most of the night hitting a low of 1.3226 as traders remained wary ahead of the ECB meeting later today.

While the market expects nothing new from Mr. Draghi, traders will be keen to see if he upgrades the economic assessment of the region given the improvement in recent data," says Boris Schlossberg at BK Asset Management.

Italian PMI is a bright spot

A bright spot for the Eurozone economy today is news that Italian PMI manufacturing PMI came in much better than expected in July, rising from 49.1 to 50.4, and climbing above the 50 threshold for the first time since July 2011.

"Today’s PMI jump comes after significant increases in the previous three months, showing that the improving trend in manufacturing activity is well entrenched. At this level, the manufacturing PMI indicates the end of the industrial recession at the beginning of 3Q, and bodes well for our expectations of a stabilization in economic activity in the third quarter," says Loredana Federico at UniCredit Bank.

BoE and ECB meetings are next hurdle for euro exchange rates today

Turning to the BOE and ECB meetings later, both are expected to remain on hold with policies with interest rates at record lows of 0.5% for both central banks.

Ishaq Siddiqi says:

"For the BOE, growth in the UK with an uptick in most measures of economic activity build a greater excuse for Mark Carney and co to refrain from using QE as a tool to stimulate the economy.

"Rather, the BOE will hammer home the message that monetary policy will remain accommodative for an extended period via forward guidance. The ECB also embarked on forward guidance, settling the markets’ nerves somewhat. That said, chief Draghi did hint that further interest rate cuts are not out of the question.

"For now, the ECB will stay on hold but are expected to offer their view on the recent improvement we have seen in euro zone economic indicators at the monthly press conference. After both central banks, attention will turn to a raft of US economic data; jobless claims, construction spending and the ISM manufacturing report."

Schlossberg says:

"The trade today, therefore is likely to trigger off Mr. Draghi's remarks. The euro has been surprisingly resilient for the past several weeks, but the pair now approaching the key swing highs near the 1.3400 level, further upside may be harder to come by, unless Mr. Draghi becomes considerably more upbeat about the second half of the year."

UK economy: Recovery is clearly taking place

The British pound has received a timely boost from today's PMI Manufacturing report which was much better than expected rising to 54,6 from 52,8 eyed as the pick up in UK economic recovery is clearly gaining pace.

"Cable spiked to 1.5200 on the news but stalled at those levels as traders once again remained cautious ahead of the BOE meeting today. Few participants expect any fresh news from the BOE, and if the central bank keeps both rates and QE targets the same, sterling could see a relief rally after several days of selloff going into the event," says Schlossberg.