World Bank?s Downgrade Of Chinese Growth Forecast Sees Pound Dollar Exchange Rate Drop, Solid German Data Supports Euro

Modified: Monday, 8 October 2012 15:02 BST - Written by Minesh Chaudhari

STORY LINK World Bank?s Downgrade Of Chinese Growth Forecast Sees Pound Dollar Exchange Rate Drop, Solid German Data Supports Euro

A generally poor day for global stock markets has seen the safe-haven US Dollar well supported, sending the GBP USD exchange rate down to close to the psychologically significant 1.6000 level. The pair has been further weighed-down by Friday’s better than anticipated US labour market data, which showed that the rate of US unemployment dropped to 7.9% last month, meaning that a further extension to the Fed’s Quantitative Easing programme now appears less likely in the short-to-medium term, at least.

The move lower for ‘Cable’ is also attributable, at least in part, to the World Bank’s lowering of its 2012 growth forecast for the world’s second largest economy – China. The widely-respected institution estimates that economic activity in the giant Asian economy will expand by 7.7%, as opposed to its previous estimate that GDP would be growing by 8.2% this year. The fact that the downbeat verdict has elicited support for the Greenback suggests that the US tender is still acting as a reserve currency.

Elsewhere, German Trade Balance and Industrial Production data for August, released earlier today, beat expectations, suggesting that the recent softening of economic data releases from the Teutonic state is coming to an end. This provided good news for the Euro, sending the GBP EUR exchange rate down to 1.2350 during this afternoon’s session in the currency markets. Tomorrow’s closely-watched NIESR GDP Growth Estimate for the three months to the end of last month will provide further direction for the pair. If the number reveals that Britain’s fragile economy is once again contracting, following August’s positive growth figure, then GBP EUR could drop down towards 1.2000 before the week is out.

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TAGS: American Dollar Forecasts Currency Predictions Dollar Poun Forecasts