Sterling rose against the euro on Wednesday, with some investors viewing Britain's currency as a safer haven given the country's relatively limited trade exposure to China.
Traders said the global market focus on an economic slowdown in China is likely to impact sterling less than commodity currencies like the Australian and New Zealand dollars. Imports from China account for just 8.7 percent of Britain's total, while the share of its exports to China is even lower.
The pound was flat against the dollar with investors unsure about the timing of expected increases in both British and U.S. interest rates.
Money markets have pushed out the timing for a Bank of England (BoE) hike to around the third quarter of next year compared with early 2016 when the central bank published its quarterly inflation report three weeks ago.
Fears of a global slowdown have intensified in recent days after China devalued its currency and data pointed to further signs of weakness. These factors have deepened a sell-off in Chinese stocks and triggered volatility in global stock markets.
About the author
Research Associate at Center for Islam and Global Affairs (CIGA) at Istanbul Sabahattin Zaim University