Pound Euro Rate @ 22 Month High, But Pound Dollar Exchange Rate Falls from Highs

However, at present it is the US dollar that is dominating action in global FX after the release of better-than-expected US Non-Farm Payroll figures. We note that while the pound dollar rate has fallen the pound euro rate has benefited:

• The pound to euro exchange rate is 0.12 pct higher at 1.2621..
• The pound to dollar exchange rate is 0.02 pct lower at 1.7151.
• The pound to Aus dollar rate is 0.1 pct higher at 1.8338.
• The pound to NZ dollar is 0.2 pct higher at 1.9641.

Please be aware that the above mid-market quotes are subject to a discretionary spread levied by your bank when making international payments. An independent FX provider will however seek to undercut your bank's offer and in some instances can deliver up to 5% more currency on execution. To learn more, please read here.

Best sterling exchange rates, but can the currency go higher?

Sterling has been pushed to twenty-two month highs against the euro as better than expected manufacturing and construction data cements the belief that UK interest rates will increase sooner rather than later.

While the pound dollar rate has slipped from this week's highs it does remain at 6 year highs.

"These new levels could provide a good opportunity for businesses to lock in an excellent budget price for the year ahead. Meanwhile sterling buyers may wish to consider the future impact this will have on their profit margins," says Carl Hasty at Smart Currency Business.

However, Greg Anderson at BMO Capital warns that the GBP may be over-extended at this time:

"The move in GBPUSD represents a new cycle high but the fact that shockingly good data can’t take GBP higher may be a sign that the market can’t get much longer."

The strength being seen in GBP will be welcomed by the bulls who are holding out for higher rates, however we must be wary that many currency pairs are looking overbought.

The GBP/USD and GBP/EUR are looking overbought in particular.

Meanwile, house price rises are also aiding the GBP - markets reckon the Bank of England may have to raise rates to cool the market. Any talk of rising interest rates will prompt further sterling buying.

Swissquote Bank comment that the euro will likely come under further pressure against the pound as a result:

"EUR/GBP broke Jun corrective uptrend channel on the downside, hit 0.79697 signaling the end of corrective phase.

"The faster house prices in UK should sustain pressure for higher BoE rates. The critical support stands at 0.79594 (year low), option related offers are seen at 0.79860/0.79850 for today expiry."

US dollar remains weak

Broad-based USD weakness sent the Cable up to the fresh high of 1.7162 in New York while the EUR/USD hit 1.3700 for the first time since May 21st.

"Walking into the ECB meeting, we believe that the EUR-bulls should remain contained, further gains are possible due to USD leg. EUR/USD currently holds ground above the critical 200-dma. The bias is positive; as the ECB dovishness is already priced in, it is now time to play for those chasing higher real returns in the Euro-area," say Swissquote.

Euro-zone peripheral yields grind lower before tomorrow’s ECB meeting.

UK Manufacturing PMI leads the way

Strength in sterling was prompted by Tuesday's Manufacturing PMI which came in ahead of expectations.

Commenting on the performance, Markit tell us:

"The UK led the worldwide manufacturing PMI rankings, followed closely by the US. The UK PMI rose to the a seven-month high, and over the course of the second quarter has enjoyed the strongest growth spurts seen
in the past 20 years, highlighting the rapid pace of expansion the country’s goods producing sectors is currently experiencing. The US meanwhile saw factories expand at the fastest rate for just over four years."

Meanwhile it was France that slipped to the bottom of the league with another month of negative data being recorded.