Markets will be comfortable with the strategy of selling dollars in the short term and will look to extend European currency gains. There will also be an increasing threat that central banks will start to oppose further gains for their currencies. The immediate focus will be on the Swiss national Bank with a high risk of franc selling on franc gains to 1.06. The Bank of England and ECB are also likely to voice some unease over the situation if the Euro and Sterling spike higher over the next few days. Euro, Swiss franc and Sterling buying look to offer little value at current levels

The UK PMI data was stronger than expected with an increase to 50.8 in July from 47.4 and this was the strongest reading since March 2008 which will reinforce near-term optimism over the economy. The data also illustrates the impact of previous Sterling weakness and UK policymakers will be aware that Sterling gains will increase the risk that recovery in the manufacturing sector will stall relatively quickly.

With the Euro-zone economy also facing severe challenges, European officials will also be wary over the implications of currency strength.