The pound to euro exchange rate is 0.112% lower on the day with 1 GBP = 1.1450 EUR. The pound to dollar rate is 0.049% higher with 1 GBP = 1.6306 USD. The pound sterling is still looking comfortable against both the euro and the US dollar as focus remains fixated on the sovereign debt issues in southern Europe and the US. On the data front pound to euro failed to react to news that UK construction sector growth suffered a minor slowdown in July. But the market was more concerned in the early session with another surge in Italian bond yields. Indicating that the market has the eurozone’s third largest economy in its cross hairs, Italian bonds overtook those of Spain yesterday (10 year yields are over 6.0%). "The UK services sector represents 70% of the UK economy and this morning’s 09:30am data will be revealing as to just how imminent another UK recession is at this stage. After some real volatility this morning, this pair is trading at €1.1450 but poor UK data may knock it off its perch," says a note from currency analyst Richard Driver at Caxton Fx. Looking at the pound to dollar rate we see that Sideways trading was the story of the day for this pair; today’s UK services sector data needs to show an upside surprise. "The US debt ceiling plan signals $2.1trn worth of spending cuts spread across ten years. This falls short of Standard & Poor’s indication that $4trn worth of cuts would be required to avoid a downgrade of US debt. However, Moody’s has reaffirmed the country’s AAA status but assigned a negative outlook. This does not rule out a downgrade in future though and we remain in wait to hear from S & P," says Driver. Fears of a US recession are growing by the day, but today’s services data may reveal circumstances in the UK are equally grave. Bets of quantitative easing on both sides of the Atlantic will be increasing. This pair is trading at $1.63 but it is difficult to be optimistic about today’s UK data.

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