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GBP/EUR Exchange Rate Gains after Beijing Intervened in China’s Equity Market, GBP/USD Forecast to Edge Lower despite Mixed US Data Results

Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Strengthen after Risk-Sentiment Improves

The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.4% on Wednesday afternoon.

After British economic data failed to meet with expectations, the Pound softened versus many of its currency rivals. The Markit Construction PMI came in at 57.3 for August which was below the median market forecast rise from 57.1 to 57.5. This less-than-ideal data result is building on Tuesday’s Sterling downtrend after British manufacturing data failed to meet with expected growth.

Commenting on the report, David Noble, Group Chief Executive Officer at the Chartered Institute of Procurement & Supply, said; ‘Capacity restraints limited some companies in their determination to actively chase new business, using their resources to fulfil current commitments. Some raw material shortages were still in evidence as suppliers were challenged to get their act together and keep pace. Any further obstacles hampering strong progress were around the lack of available skilled staff as subcontractors were still highly sought-after and offered higher wages. But, the rise in the level of permanent posts and employment generally rising for the last 32 months, confirmed an optimism displayed by more than half of the survey respondents.’

The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.3603.

The shared currency, meanwhile, declined versus its major peers during Wednesday’s European session. The depreciation can be linked to improved trader risk-appetite after China’s government used state-backed capital to prop up the ailing equity market. Additionally, China has just begun a holiday which will see markets closed until Monday. That has eased concerns regarding volatility in response to uncertainty in China’s markets.

In addition to improving market sentiment, the single currency declined in response to fears regarding price pressures. Many analysts predict that the European Central Bank (ECB) will be forced to expand quantitative easing in order to combat Euro overvaluation. For the weaker economies in the currency bloc, a high valued common currency could have significantly detrimental ramifications.

The Pound Sterling to Euro (GBP/EUR) exchange rate was trending within the range of 1.3530 to 1.3615 during Wednesday’s European session.

Pound Sterling to US Dollar (GBP/USD) Exchange Rate Forecast to Tick Lower ahead of US Factory Orders

The British Pound to US Dollar (GBP/USD) exchange rate declined fractionally by around -0.1% on Wednesday afternoon.

With Sterling struggling in the face of underachievement in the manufacturing and construction sectors, Thursday’s Services PMI will be of paramount importance. Given that the services sector makes up the vast majority of British gross domestic product, a better-than-anticipated result will bolster Sterling gains. The Composite PMI is unlikely to print positively given the below-forecast results from construction and manufacturing.

The Pound Sterling to US Dollar (GBP/USD) exchange rate is currently trending in the region of 1.5301.

Thus far on Wednesday afternoon US data has produced mixed results. MBA Mortgage Applications for the week ending August 28th advanced by 11.3%, significantly better than the preceding week’s 0.2% gain. However, ADP Employment Change failed to meet with expectations of 200,000 in August, with the actual result only reaching 190,000. The US asset is generally trending lower versus its major peers as traders await Factory Orders data due for publication later on Wednesday afternoon.

The Pound Sterling to US Dollar (GBP/USD) exchange rate was trending within the range of 1.5262 to 1.5320 during Wednesday’s European session.