Pound Advances On Strong GDP Data, Rising European Shares

The pound strengthened against its major counterparts in early European deals on Tuesday, as a data showed that the nation's economy grew more than expected on year in the fourth quarter and promising comments from Chinese President Xi Jinping soothed some of the worries over the coronavirus outbreak.

Data from the Office for National Statistics showed that GDP rose 1.1 percent year-on-year, up from expectations of 0.8 percent.

Monthly GDP rose 0.3 percent, offsetting a 0.3 percent fall in November.

On quarter, gross domestic product remained unchanged, as expected, after expanding 0.5 percent in the third quarter.

In December,the visible trade balance swung to a surplus of GBP 845 million from a GBP 4.947 deficit in the previous month. In the same month last year, there was a deficit of GBP 13.767 billion.

Exports jumped 17.4 percent month-on-month after a 3.3 percent increase in the previous month. Imports decreased 0.1 percent after an 11.6 percent fall in November.

In the fourth quarter, industrial production dropped 0.8 percent, led by a 1.1 percent fall in manufacturing. Construction output was up 0.5 percent and services grew 0.1 percent.

Business investment declined 1 percent sequentially, in contrast to a 0.2 percent rise in the third quarter.

In remarks on state television, Xi Jinping vowed to win the fight against the coronavirus outbreak.

Jinping said that China will speed up the development of drugs aimed at treating the deadly pneumonia-like virus.

The pound traded mixed against its major counterparts in the Asian session. While it rose against the yen and the franc, it fell against the greenback. Versus the euro, it held steady.

The pound appreciated to 1.2943 against the dollar, from a low of 1.2894 seen at 3:15 am ET. The pound is likely to find resistance around the 1.32 area.

The pound strengthened to a 4-day high of 142.21 against the yen, after falling to 141.70 at 7:15 pm ET. Next key resistance for the pound is likely seen around the 144.00 level.

Having declined to 1.2607 against the franc at 3:45 am ET, the pound rebounded and was trading at 1.2630. On the upside, immediate resistance for the pound is found near the 1.28 level.

The pound climbed to an 8-day high of 0.8432 against the euro, from Monday's closing value of 0.8448. If the pound continues its rise, 0.83 is possibly seen as its next resistance level.

Looking ahead, European Central Bank President Christine Lagarde will deliver a speech before the European Parliament in Strasbourg at 9:00 am ET.

Federal Reserve Chair Jerome Powell testifies on the Semiannual Monetary Policy Report before the House Financial Services Committee in Washington DC at 10:00 am ET.

At 10:35 am ET, Bank of England Governor Mark Carney will testify before the House of Lords Economic Affairs Committee in London.

Federal Reserve Governor Randal Quarles will give a speech about bank supervision at the Yale Law School Dean's Lecture in Connecticut at 12:15 pm ET.