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Forex News: Pound Falls As UK Economy Shrinks Unexpectedly

Pound Falls As UK Economy Shrinks Unexpectedly

08/09/2019 - 06:00:00 (RTTNews)

(RTTNews) - The pound declined against its major counterparts in the early European session on Friday, as U.K. economy contracted unexpectedly in the second quarter for the first time since 2012.

Preliminary data from the Office for National Statistics showed that gross domestic product fell 0.2 percent sequentially, reversing first quarter's 0.5 percent growth. GDP was forecast to remain flat.

On an annual basis, the economy grew at a slower pace of 1.2 percent after rising 1.8 percent in the first quarter.

GDP remained flat on month in June after expanding 0.2 percent in May. Economists had forecast a 0.1 percent rise.

Industrial production fell 0.1 percent on month in June, while economists had predicted a decline of 0.2 percent.

Separate data showed that UK merchandise trade deficit narrowed more-than-expected in June.

The trade deficit fell to GBP 7.01 billion from GBP 10.70 billion in May. Economists had expected the trade gap to narrow to GBP 11 billion from May's originally reported GBP 11.52 billion.

The pound traded mixed against its major counterparts in the Asian session. While it held steady against the euro and the franc, it rose against the greenback and the yen.

The pound declined to an 8-day low of 1.2087 versus the greenback from yesterday's closing value of 1.2131. Next possible downside target for the pound is seen around the 1.19 level.

The U.K. currency fell to 128.09 versus the yen for the first time since November 2016. The pair had ended Thursday's deals at 128.69. The pound is likely to find support around the 125.00 level, if it drops further.

The pound slid to an 8-year low of 1.1775 against the franc, compared to 1.1824 hit late New York Thursday. On the downside, 1.14 is likely seen as the next target level for the pound.

After a 2-day rise to 0.9205 against the euro at 5:00 pm ET, the pound reversed direction and fell to 0.9258 following the data. The pound is seen finding support around the 0.94 level.

Data from Destatis showed that Germany's exports dropped marginally in June, while imports increased for the first time in three months.

Exports fell by a seasonally adjusted 0.1 percent month-on-month in June, reversing a 1.3 percent rise in May. The rate came in line with expectations.

Looking ahead, Canada housing starts for July are set for release at 8:15 am ET.

In the New York session, Canada building permits for June and jobs data for June as well as U.S. producer prices for the same month will be featured.

For comments and feedback: contact editorial@rttnews.com

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