Pound Slides As U.K. Economy Shrinks For Second Month
10 Juni 2019 - 07:53AM
RTTF2
The pound depreciated against its major counterparts in early
European deals on Monday, as UK economy contracted for the second
straight month in April on weak manufacturing amid uncertainty
about the Brexit crisis.
Data from the Office for National Statistics showed that GDP
fell 0.4 percent on a monthly basis after easing 0.1 percent in
March. GDP was forecast to drop again by 0.1 percent.
In three months to April, GDP expanded at a slower pace of 0.3
percent after climbing 0.5 percent in the first quarter.
In April, industrial production declined for the first time this
year on sharp fall in manufacturing. Production decreased 2.7
percent month-on-month, reversing a 0.7 percent rise in March and
bigger than the expected 1 percent drop.
Manufacturing output contracted 3.9 percent on month, in
contrast to a 0.9 percent rise in March. This was the biggest fall
since June 2002 and larger than the forecast of 1.4 percent
decrease.
On a yearly basis, industrial production fell 1 percent after
expanding 1.3 percent a month ago. Likewise, manufacturing slid 0.8
percent following a 2.6 percent rise in previous month.
Economists had forecast industrial output to grow 0.9 percent
and manufacturing to climb 2 percent.
Another report from ONS showed that the visible trade deficit
narrowed to a six-month low in April. The trade gap fell to GBP
12.1 billion in April from GBP 15.4 billion in March.
At the same time, the trade in services showed a surplus of GBP
9.37 billion. Consequently, total trade deficit narrowed to GBP
2.74 billion from GBP 6.15 billion a month ago.
The currency traded mixed against its major counterparts in the
Asian session. While it held steady against the franc and the euro,
it fell against the yen and the greenback.
The pound weakened to near a 5-month low of 0.8906 against the
euro, after rising to 0.8880 at 4:00 am ET. The pound may test
support around the 0.90 level, if it drops again.
The U.K. currency depreciated to a 4-day low of 1.2685 against
the greenback, from a high of 1.2735 seen at 6:00 pm ET. The
currency is seen finding support around the 1.24 region.
After rising to near a 2-week high of 138.25 against the yen at
4:00 am ET, the pound reversed direction with the pair trading at
137.79. The currency is likely to target support around the 136.00
area.
Data from the Cabinet Office showed that Japan's gross domestic
product gained a seasonally adjusted 0.6 percent on quarter in the
first three months of 2019.
That's an upward revision from 0.5 percent in last month's
preliminary reading, and it was in line with expectations.
The pound declined to a 5-day low of 1.2562 against the Swiss
franc, following an advance to 1.2608 at 4:00 am ET. On the
downside, 1.24 is possibly seen as the next support level for the
pound.
Looking ahead, Canada housing starts for May and building
permits for April are scheduled for release in the New York
session.
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