A rise in risk aversion yesterday helped sterling par its losses vs euro

Sterling pared its losses yesterday to close the day just 0.05% down at 1.1358.

• Sterling suffered another setback against the single currency yesterday, relinquishing early gains following the release of weak manufacturing figures that came in below forecast.
  
• UK manufacturing PMI dropped to 49.7 in August from 50.2 in July, against market expectations of further recovery to levels around 52.0.
  
• Additionally consumer lending declined in July for the first time since records began in 1993 falling by £600m in July from a revised £200m increase in June.
  
• This unexpected data cast further doubts on the prospects of an improvement in the UK economy and a rise in interest rates, putting selling pressure on the pound.
  
• However, some analysts have said that the worst is probably over for the pound, with data yesterday also showing signs of improvement in the housing market as mortgage approvals rose to their highest levels in 15 months.
  
• In the UK today, figures are released at 09:30BST on the construction industry with forecasts predicting another contraction, whilst in the eurozone their revised GDP figure will be released at 10:00BST.