Pound Rises On Upbeat U.K. GDP Data

(RTTNews) - The British pound strengthened against most major currencies in the European session on Thursday, as the U.K. economy rebounded at a faster-than-expected pace in June.

Data from the Office for National Statistics showed that the U.K. gross domestic product grew 0.4 percent, following a fall of 0.1 percent in May. Output was forecast to grow 0.2 percent.

All three main sectors grew in June. Services output was the largest contributor to the growth in monthly GDP, increasing by 0.3 percent after a 0.1 percent rise in May.

Industrial production increased 0.7 percent, reversing a revised 1.3 percent fall. Within overall production, manufacturing gained 0.5 percent, partially offsetting May's 1.0 percent fall.

Construction output expanded 0.3 percent after falling 0.5 percent in May.

In the second quarter, real GDP expanded 0.3 percent sequentially and 1.1 percent from the previous year.

Another data from the ONS showed that the visible trade deficit remained largely unchanged at GBP 22.16 billion in June. The total trade that combines goods and services showed a shortfall of GBP 5 billion compared to a GBP 4.5 billion deficit in May.

Positive manufacturing and GDP numbers indicate that the economy is doing better than expected, which could prevent the Bank of England (BoE) from lowering interest rates sharply and boost the value of the pound sterling.

European shares edged up to hit a two-week high as investors assessed a slew of earnings and U.K. GDP data.

Hopes of an interest rate cut by the Federal Reserve next month, and expectations that the upcoming meeting between U.S. President Donald Trump and Russian President Vladimir Putin will help end the war in Ukraine, also led to the upturn of investor sentiment.

In the European trading today, the pound rose to a 1-1/2-month high of 1.0961 against the Swiss franc, from an early low of 1.0930. On the upside, 1.10 is seen as the next resistance level for the pound.

Against the euro and the U.S. dollar, the pound advanced to more than 1-month highs of 0.8597 and 1.3595 from early lows of 0.8625 and 1.3563, respectively. If the pound extends its uptrend, it is likely to find resistance around 0.88 against the euro and 1.38 against the greenback.

Meanwhile, the pound dropped to a 3-day low of 198.60 against the yen, from an early high of 199.87 and held steady thereafter.

Looking ahead, U.K. NIESR monthly GDP tracker for July, U.S. PPI data for July and weekly jobless claims data are slated for release in the New York session.