Sterling found support from strong services PMI data yestreday, but lost ground to the euro in the later session

Having posted solid gains throughout the morning and afternoon sessions, briefly reaching over 1.12, the pound slipped back, enabling the euro to close marginally up on the day.

• Sterling initially rose after data showed a higher-than-expected increase in UK service sector activity and as a rebound in equity markets eased risk aversion.
  
• The services PMI index rose to 56.9 in September, its highest level since August 2007, beating market expectations of a rise to 55.4, and the sixth successive month above the 50-level, which represents industry expansion.
  
• However, the euro recovered its losses in the wake of a strong rally against the US dollar, which came under heavy selling pressure following the Fed's rate statement.
  
• In trading today, investors are eagerly awaiting the announcement from the BoE, with market consensus being that they will top-up the quantitative easing programme by at least £25 billion after the economy unexpectedly contracted between July and September.
  
• However, recent positive manufacturing and services data is likely to harden the attitude of those members of the MPC who are opposed to an extension.
  
• The ECB rate decision is also due today, at 12:45. Markets are widely expecting rates to be held at 1.00%.