The highlight of today thus far is sterling's surge versus the Aus Dollar. Elsewhere, Tuesday sees a continuation of currency marketing positioning ahead of next month's MPC decision due on Thursday. Thursday also sees the release of the first major economic release of the week in the form of Manufacturing PMI. We will thus be focused on sterling's technical levels and on data events in the US and Eurozone.

16:40: Month-end rebalancing likely to prompt US dollar selling

Aroop Chatterjee at Barclays says the end of July is likely to be USD negative from a flow perspective:

"The relative strong outperformance of US asset markets imply international asset managers are likely underhedged on their USD exposures relative to other currencies. The model output shows a strong USD sell signal across the board."

By measuring asset market flows in country bond and equity markets, Barclays aim to determine the directional movement in the period before the fix due to portfolio managers' rebalancing of existing currency hedges.

The rationale is that international asset managers have an incentive to follow the hedging practice of their benchmark indices, and the changes in market value of the underlying assets (equities and bonds) lead to the need to rebalance currency hedges.

16:00: RBS see potential for further squeeze higher in GBP

Nick Mannion at RBS says:

"For GBP/USD, reassurance from the FOMC that rate hikes are still a long way off may continue to support a squeeze higher. However, gains up to 1.57 are unlikely to be sustained, in our view. We remain relatively neutral on EUR/GBP, with upside likely on an unexpected BoE rate cut on Thursday."

14:05: Rates in early afternoon

The pound sterling is seeing weakness against the USD and EUR in afternoon trade. However the weakness amongst the antipodean currencies remains the highlight of today's trading session.

• The pound to euro exchange rate is 0.34 pct down on a day-to-day basis at 1.1528.
• The pound to US dollar exchange rate is 0.16 pct lower at 1.5315.
• The pound to Australian dollar exchange rate is 1.17 pct higher at 1.6857.
• The pound to New Zealand dollar is 0.22 pct up at 1.9142.

NB: The above quotes are taken from the wholesale spot markets, your bank will charge a discretionary spread when passing on their retail offer. However, an independent FX provider will guarantee to undercut your bank's offer, thereby delivering more currency. Please learn more here.

12:35: Sterling in Limbo till the 7th of August?

Bank of America Merrill Lynch 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.

10:55: GBP/EUR in fresh losses

So the EZ Consumer Confidence and Business Confidence data has helped the Euro, despite it not being anything special at all.

The euro is firm following the release of Eurozone Consumer Confidence data which edged up to -17.4 in July, from -18.8 in June. This result is in line with market consensus.

Eurozone Business Climate rose to -0.53 in July, from -0.67 in June, above expectations of a increase to -0.55.

GBP/EUR is now 0.31 pct in the red at 1.1531.

10:45: A Jane Austen saga

Choosing the next face of the 10 GBP note really has proven to be a saga.

Is Jane Austen the woman who really deserves the spot?

Frances Wilson at the Daily Mail:

"So dull. So over-rated. Jane Austen doesn't deserve to be on the £10 note."  

"Her subject is the pursuit of lucre, not love. Cash for her heroines is like calorie‑counting for Bridget Jones. Every time one of Austen’s girls meets a man, she tots up the figures and calculates their daily consumption." More here.

9:53: Key resistance levels for GBP/USD

@ 8:18 we brought comment regarding the upside potential for the British pound versus US dollar.

This view is now brought into question by the team at FXMarketAlerts:

"Retreat from last week's high of 1.5433 is eroding upside momentum and slip of 1.5329 support will expose deeper setback to 1.5302/1.5292 area. Bulls will have to make a decisive push above the 1.5433 resistance to regain upside footing."

8:35: Australian dollar dominates currency market action

Chris Weston at IG in Melbourne:

"Australia has been at the heart of the action today, with June building approvals showing that you can bring down the cash rate 200 basis points, but it doesn’t always translate into good housing data, and in this case a clear translation effect on the domestic economy. June approvals fell 6.9% in June (13% on the year), against expectations of +2%; what’s more, the May print was revised from -1.1% to -4.3%.

"RBA governor Stevens spoke just after lunch and in a pre-prepared speech and subsequent Q&A session suggested the bank still had room to ease after the recent CPI data.

"His words were dovish and backed up what he said three weeks ago when he argued ‘if the economy needs a lower exchange rate, it will probably get it’."
"This time he detailed that a lower AUD makes sense, and that expectations for a drop are fair."

8:30: Sterling surges versus Aus dollar, flat versus EUR, USD

The British Pound Sterling (Currency:GBP) is calm apart from a surge against the Australian currency:

• The pound to euro exchange rate is flat ahead of this morning's consumer confidence data (See below). GBP/EUR is quoted at 1.1565.
• The pound to US dollar exchange rate is flat on last night's close at 1.5342.
• The pound to Australian dollar exchange rate is 1.66 pct higher at 1.6941.

8:20: Pound / Euro exchange rate awaits consumer confidence data

There is some potential GBP/EUR moving data due this morning in the form of Eurozone July Consumer Confidence. Consensus estimates are for a reading of -17.4.

Lloyds Bank say:

"Euro area consumer and industrial confidence data for July are also released this morning. Despite rising unemployment, household confidence has shown a steady improvement since 2012Q4 and we expect the final July estimate to be unchanged from its preliminary counterpart of -17.4. Euro area industrial confidence has also rebounded since late last year but its  recovery has been more tentative.

"Nonetheless, amidst signs  that the euro area recession is bottoming out and improving prospects in Germany and France we expect the index to rise from -11.2 in June to -7.5 this month."

8:18: GBP still biased for upside versus US dollar

Camilla Sutton at Scotiabank:

"GBP/USD short‐term technicals: bullish—similar to EUR all signals are in buy territory with no warning signals on the charts."

However, longer term, GBP is forecasted to decline through to the end of 2013:

"We expect GBP to weaken late this quarter and into year-end as the market refocuses on relative growth (UK underperformance), diverging monetary policy paths and building GBP bearish sentiment. We hold a yearend target of 1.45."