Pound Rises After Upbeat U.K. GDP Data

(RTTNews) - The British pound strengthened against other major currencies in the European session on Thursday, after the U.K. economy expanded unexpectedly in the fourth quarter, underpinned by services and construction output.

Data from the Office for National Statistics showed that the U.K. gross domestic product grew 0.1 percent from the third quarter, confounding expectations for a contraction of 0.1 percent. This follows a nil growth in the third quarter. On a yearly basis, the fourth quarter growth in GDP came in at 1.4 percent compared to 1.0 percent in the third quarter.

The services sector expanded 0.2 percent and construction output grew 0.5 percent in the fourth quarter. Partially offsetting these gains, industrial production declined 0.8 percent.

Further, data showed that the economy registered a monthly growth of 0.4 percent in December after rising 0.1 percent in November.

Another data from the ONS showed that the visible trade gap narrowed to GBP 17.4 billion in December from GBP 18.9 billion in the previous month.

The total trade deficit that combines trade in goods and services declined sharply to GBP 2.8 billion from GBP 4.4 billion in November.

The European stock markets traded higher, after U.S. President Donald Trump and Russian President Vladimir Putin have agreed to start talks to end the Ukraine War in a significant step towards resolving the conflict.

After a phone call between them, both leaders expressed hope for a peaceful resolution.

Meanwhile, Trump could sign his reciprocal tariff plan that will match other countries' higher import taxes sometime later today. The new U.S. tariff rates would take effect "almost immediately".

Earlier in the day, the Bank of England (BoE) Chief Economist Huw Pill told that the central bank needs to move cautiously on further policy easing, as the battle against inflation is far from over.

In the European trading today, the pound rose to an 8-day high of 1.2517 against the U.S. dollar, a 9-day high of 193.05 against the yen and nearly a 7-month high of 1.1404 against the Swiss franc, from early lows of 1.2443, 191.93 and 1.1338, respectively. If the pound extends its uptrend, it is likely to find resistance around 1.28 against the greenback, 197.00 against the yen and 1.15 against the franc.

Against the euro, the pound edged up to 0.8332 from an early low of 0.8357. The pound may test resistance around the 0.82 region. Looking ahead, Eurozone industrial production for December is due to be released at 5:00 am ET in the European session.

In the New York session, U.S. PPI for January and U.S. weekly jobless claims are slated for release.