The pound lost ground against its major rivals in the European session on Tuesday, as the U.K. economy grew at a slower pace than expected in May as the easing of restrictions had a limited impact.

Data from the Office for National Statistics showed that gross domestic product grew 1.8 percent in May from April, when it was down 20.3 percent. However, this was weaker than the expected growth of 5.5 percent.

The dominant service sector grew 0.9 percent after contracting 18.9 percent. The largest positive contributor to the increase was the wholesale, retail and repair of motor vehicles.

Industrial production logged a notable growth of 6 percent, following a 20.2 percent fall. At the same time, manufacturing was up 8.4 percent versus a 24.4 percent drop in the previous month.

Nonetheless, industrial output was 19.1 percent lower than the pre Covid-19 level in February.

In three months to May, the economy shrank 19.1 percent, following a 10.8 percent fall in April.

Another report from ONS showed that the visible trade deficit narrowed to GBP 2.81 billion from GBP 4.8 billion in April. Exports of goods grew 6.6 percent, while imports fell 1.7 percent.

The surplus on trade in services was largely unchanged at GBP 7.1 billion. Consequently, the total trade surplus surged to GBP 4.3 billion from GBP 2.3 billion in April.

Rising Sino-U.S. tensions and worries about the state of California shutting down dented investors' appetite for riskier assets.

U.S.-China tensions intensified after the Trump administration rejected China's expansive maritime claims in the South China Sea, a move that Beijing criticized as inciting tensions in the region.

California on Monday banned indoor dining and shuttered movie theaters and bars as coronavirus infection spread beyond the Sun Belt.

The pound declined to a 2-week low of 0.9085 against the euro, after climbing to 0.9021 at 5:00 pm ET. On the downside, 0.92 is possibly seen as the next support level for the pound.

Data from Eurostat showed that Eurozone industrial production rebounded in May as most of the factories reopened in member countries after the easing of coronavirus containment measures.

Industrial production grew 12.4 percent on month, in contrast to an 18.2 percent decrease in April. Nonetheless, this was slower than the expected growth of 15 percent.

The pound slipped to 1.2506 against the greenback, setting a 1-week low. The pound is likely test support around the 1.22 area.

The pound dropped to a 1-week low of 134.18 against the yen, compared to 134.70 hit late New York Monday. Should the pound falls further, it may find support around the 132.00 level.

Data from the Ministry of Economy, Trade and Industry showed that Japan industrial production declined more than estimated in May.

Industrial production fell a seasonally adjusted 8.9 percent month-on-month in May. According to initial estimate, production was down 8.4 percent.

The pound depreciated to 1.1746 against the franc, its lowest level since July 6. The pound is seen facing support around the 1.14 level.

Looking ahead, U.S. CPI for June is set for release in the New York session.

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