Forex News: Pound Falls As U.K. Economy Shrinks Unexpectedly

Pound Falls As U.K. Economy Shrinks Unexpectedly

(RTTNews) - The British pound weakened against other major currencies in the European session on Friday, after the U.K. economy contracted marginally for the second straight month in October largely reflecting the fall in industrial production.

Data from the Office for National Statistics showed that U.K. real gross domestic product shrank unexpectedly 0.1 percent in October, the same pace of decline as in September. GDP was forecast to grow 0.1 percent.

Services output showed no growth in October, while industrial production decreased 0.6 percent because of falls in manufacturing and mining and quarrying.

Industrial output was forecast to grow 0.3 percent, following September's 0.5 percent decline. Within industrial production, manufacturing output registered a decline of 0.6 percent after a 1.0 percent fall.

At the same time, construction output slid 0.4 percent, in contrast to the 0.1 percent increase in September.

On a yearly basis, GDP growth improved to 1.3 percent from 1.0 percent in September. Still, it was weaker than forecast of 1.6 percent.

Another data from the ONS showed that the visible trade deficit widened to GBP 18.96 billion from GBP 16.32 billion in the previous month. The expected level of shortfall was GBP 16.1 billion.

Meanwhile, the surplus on services rose to GBP 15.3 billion from GBP 12.9 billion a month ago. As a result, the overall trade shortfall totaled GBP 3.7 billion compared to a GBP 3.5 billion shortfall in September.

Earlier in the day, survey data from the market research group GfK showed a slight improvement in British consumer confidence in December. The consumer sentiment index edged up by one point to -17 in December.

Investors also await an announcement on the appointment of a new prime minister in France.

President Emmanuel Macron is set to announce the appointment today, the Elysee Palace confirmed after Macron missed his self-imposed Thursday deadline.

In the European trading now, the pound fell to a 1-week low of 0.8301 against the euro, nearly a 2-week low of 1.2619 against the U.S. dollar and a 2-day low of 192.86 against the yen, from early highs of 0.8260, 1.2680 and 194.06, respectively. If the pound extends its downtrend, it is likely to find support around 0.84 against the euro, 1.24 against the greenback and 189.00 against the yen.

Against the franc, the pound edged down to 1.1277 from an early high of 1.1309. On the downside, 1.11 is seen as the next support level for the pound.

Looking ahead, U.K. NIESR monthly GDP tracker for November, Canada manufacturing and wholesale sales data for October, U.S. import and export prices for November and U.S. Baker Hughes oil rig count data are due to be released in the New York session.

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