Euro pound exchange rate: GBP still unable to capture 1.2 level against the Euro as battle of contrition continues

A look at the currency markets on Wednesday morning shows a battle of contrition continuing.

The euro to pound exchange rate is currently quoted at 0.8345.
The pound to euro exchange rate is 0.06 pct higher on a day-to-day basis at 1.1983.

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UK data unable to give Sterling that much needed boost

Resistance levels are named as such as they simply do what the name on the tine suggests.

While 1.2 is a big psychological number the resistance appears to lie just before it, at current levels.

The British pound bulls would have really hoped that today's construction PMI data would have provided the necessary impetus to smash through resistance.

In the event this has not been the case.

The number read at 58.9, below forecasts for 59.2.

It is also below August's reading at 59.1.

"Yesterday’s UK manufacturing PMI showed that sterling is resilience to some minor disappointment suggesting that the overall sentiment is still sterling positive," says Piet Lammens at KBC Markets explaining why the GBP was not sold on today's data miss.

Lammens goes on to say he is backing sterling against the Euro going forward:

"We don’t see a trend reversal of sterling unless the UK eco data would turn for the worse (not our basis scenario), but still prefer a sell EUR/GBP in case of a correct."

Stay on your toes - ECB risk lies ahead

Watch out for the European Central Bank interest rate decision and press conference ahead starting at 12:45.

Any surprises from the ECB and Draghi could send the Euro marching in either direction.
KBC Markets advise clients that they expect the ECB to talk dovish in an attempt to prevent more euro strength.

"Even so, ‘hard action’ (a rate cut, a new LTRO....) rather than only talking/policy guidance is needed to tip the balance of EUR/USD again to the disadvantage of the euro," says Lammens.