Early gains for the pound vs euro yesterday were lost as equities receeded from their highs

Having made early gains against the single currency, the pound stumbled in later trading, to close the day marginally below the 1.14 level.

• Sterling initially reversed Monday’s losses, recovering to 1.1451 as data revealed that manufacturing output rose at its fastest rate in one and a half years in July, which encouraged investment demand.
  
• The improved reading of 0.9%, which was three times what had been forecast, was helped largely by a sharp rise in car production which rose by 10.4% in July from June.
  
• The figures suggest that the UK economy has made a stronger start to the third quarter and may be on track to emerge from recession sooner than previously predicted.
  
• However, in the afternoon the pound was unable to capitalize on its early gains as the rally in equities appeared to favour euro investment, allowing the single currency to regain its value.
  
• Trading this morning has seen the pound edge lower as the European stock markets start trading in the red.
  
• The pound may be able to hold its value today if UK trade balance figures, released at 09:30BST, follow forecasts and show improvement in July.