Pound Slides On U.K. GDP Disappointment
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
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
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
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
California on Monday banned indoor dining and shuttered movie
theaters and bars as coronavirus infection spread beyond the Sun
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
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
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
Looking ahead, U.S. CPI for June is set for release in the New
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