Forex - Pound little changed against broadly stronger dollar

The pound was little changed against the dollar on Wednesday and fell to session lows against the euro after data showed that the euro zone composite output purchasing managers’ index rose to its highest level in 18 months in July.

GBP/USD hit 1.5346 during European morning trade, the session low; the pair subsequently consolidated at 1.5363, dipping 0.04%.

Cable was likely to find support at 1.5256, Monday’s low and resistance at 1.5391, Tuesday’s high and a one-month high.

Data released on Wednesday showing that Chinese manufacturing activity slumped to an 11-month low in July supported safe haven demand for the dollar.

The preliminary reading of China’s HSBC manufacturing purchasing managers’ index fell to 47.7 in July, from a final reading of 48.2 last month. Analysts had expected the index to rise to 48.6. A reading below 50 indicates a contraction.

Elsewhere, sterling fell to three-day lows against the euro, with EUR/GBPadvancing 0.16% to 0.8615.

Markit's euro zone composite PMI output index rose to 50.4 from 48.7 in June on the back of stronger data from Germany and France, fuelling optimism that the euro zone economy could emerge from a recession in the third quarter.

Germany’s manufacturing PMI rose to 50.3 from June's reading of 48.6, and the service sector PMI jumped to 52.5, from 50.4.

The French manufacturing PMI ticked up to a 17-month high of 49.8 from 48.4 in June, while France’s services PMI improved to 48.2 from 47.2 last month.

Investors were looking ahead to U.S. data on new home sales later in the trading day, amid speculation over the timing of a possible withdrawal of the Federal Reserve’s bond buying program.

Fed Chairman Ben Bernanke said last week that the pace of the bank’s bond purchases would depend on U.S. economic health.