Pound euro exchange rate: Outlook for GBP/EUR remains positive as Eurozone data easily under-performs that of the UK

For reference, the euro to pound exchange rate is thus quoted at 0.8354.

British pound sterling: UK PMI underwhelms, GBP surprisingly unfazed

The big event out of the UK was the release of the first of the Markit PMI series at 09:28.

The manufacturing PMI read at 56.7; consensus forecasts were for a reading of 57.3 while last month saw a release of 57.2.

The reaction of the British pound to the data would suggest that markets were 1) actually positioned for a little disappointment, 2) looking for a bigger deviation as an excuse to press the sell button 3) more focused on global events, like the US fiscal crisis and the Italian political crisis.

The Euro: Economic data releases show recovery will remain slow

The Euro is trading heavier today after it was revealed that the German Unemployment Change (Sep) reading showed 25 thousand extra Germans out of work. Markets had only expected the workforce to add 5 thousand jobs.

The German unemployment rate has now actually crept up from 6.8% to 6.9%.

Also weighing on the Euro today was the release of the German Markit Manufacturing PMI (Sep) which read at 51.1, markets had expected 51.3.

Now compare that to the UK's 56.7 and you begin to understand that despite the UK missing target it is well ahead of Germany.

Meanwhile in France the Manufacturing PMI came in at 49.8 - still in contraction territory.

Markit Manufacturing PMI (Sep) for Italy read at 50.8, below expectations of a reading for 51.

Italian political crisis also weighs on the euro

Meanwhile, there is persistent political headache throbbing over in Italy.

Jeremy Cook at WorldFirst gives us a rundown of the situation:

"Despite Berlusconi managing to force a crisis upon Enrico Letta’s government by asking five members of his Forza Italia party that served in the coalition cabinet to resign, there is a chance that he has lost control of this particular runaway train.

"There is a chance that Letta may be able to corral support from the disaffected former ministers but at the moment this seems to be nothing more than wishful thinking.

"Unfortunately, it does not seem that Letta will have the votes tomorrow in the Senate. The decision to raise VAT in Italy did pass however and will increase by one percentage point as of today."

According to Cook the real headache for the euro will come when the Italian funding markets come under pressure.