Pound Rises As U.K. Economy Rebounds

(RTTNews) - The British pound strengthened against other major currencies in the European session on Thursday, after U.K. economy rebounded at a faster-than-expected pace in May underpinned by broad-based expansion in services, manufacturing and construction industries.

Real gross domestic product grew 0.4 percent in May after showing no growth in April, the Office for National Statistics reported. The actual growth was double the expected 0.2 percent expansion.

Services output expanded 0.3 percent in May and became the biggest contributor to the growth.

Industrial production grew 0.2 percent, reversing a fall of 0.9 percent in April. Within in total production, manufacturing rebounded 0.4 percent following a 1.6 percent decline. At the same time, construction output was up 1.9 percent.

Another official data today showed that the visible trade deficit narrowed to GBP 17.9 billion in May from GBP 19.4 billion in April. Meanwhile, the surplus on services trade remained almost unchanged at GBP 13 billion.

As a result, the total trade deficit narrowed to GBP 4.89 billion from GBP 6.4 billion in the previous month.

The European stock markets traded higher as traders eye September for the Federal Reserve's first rate cut.

"Our undertaking is to make decisions when and as they need to be made, based on the data, the incoming data, the evolving outlook and the balance of risks, and not in consideration of other factors, and that would include political factors," Fed Chair Jerome Powell said in a hearing before the House Financial Services Committee.

There are also expectations that a U.S. government report due later in the day will show inflation continued to moderate in June.

In the European trading today, the pound rose to a 17-year high of 208.11 against the yen and a 4-month high of 1.2873 against the U.S. dollar, from early lows of 207.58 and 1.2849, respectively. If the pound extends its uptrend, it is likely to find resistance around 209.00 against the yen and 1.29 against the greenback.

Against the Swiss franc and the euro, the pound advanced to nearly a 1-1/2-month high of 1.1573 and nearly a 1-month high of 0.8420 from early lows of 1.1553 and 0.8443, respectively. On the upside, 1.17 against the franc and 0.82 against the euro are seen as the next resistance levels for the pound.

Looking ahead, U.K. NIESR monthly GDP tracker data, U.S. inflation data for June, U.S. weekly jobless claims data and U.S. Federal budget balance report for June are slated for release in the New York session.