LONDON (AFX) - The euro was firm, but off earlier highs, in early trade, benefiting from a soft dollar and after a batch of weak PMI numbers rekindled hopes for a rate cut by the European Central Bank tomorrow, dealers said. They added that there were still many people who thought the US administration will switch from its strong dollar policy but that equal numbers disagree. "The euro is trading within a narrow range," Chris Furness, senior currency strategist at 4CAST, said. The French manufacturing sector purchasing managers' index fell to a seasonally adjusted 48.3 in July from 48.83 in June, Italy's fell to a seasonally adjusted 46.40 in July from 48.30 in June, while Germany's PMI fell to 46.3 in July, the lowest level since December 1998, compared with 46.6 in June. The euro zone manufacturing sector purchasing managers' index fell to a seasonally adjusted 47.3 in July from 47.9 in June, according to market sources. Furness said: "The euro is holding well probably because the data should increase the possibilities of a rate cut by the ECB this week." Analysts added that large buying of euro/yen from continental banks lifted the single currency to a three-month high at 110.08 in early trade. "There has been suggestions that the continued weigh of dollar/yen selling yesterday kept the lid on the pair, which meant that those still wanting to sell yen ended up doing it against the euro," Furness said. Sterling was firm against the dollar, breaking above 1.43 usd level and drawing support from a much strong-than-expected growth in UK retail sales volumes in July. In its latest distributive trades survey, the Confederation of British Industry reported that the net balance of retailers reporting increased sales volumes in July rose to +22 from +17 in June. It said the pick-up in the rate of growth is the fastest since May 2000. The market widely believes that the Bank of England's monetary policy committee will leave rates on hold at 5.25 pct on Thursday. "Although the CBI called for a rate cut, the numbers on the survey give even more reason for the non-movers to win in the BoE's MPC," Furness said.