Pound Slides As U.K. Economy Shrinks For Second Month

The pound depreciated against its major counterparts in early European deals on Monday, as UK economy contracted for the second straight month in April on weak manufacturing amid uncertainty about the Brexit crisis.

Data from the Office for National Statistics showed that GDP fell 0.4 percent on a monthly basis after easing 0.1 percent in March. GDP was forecast to drop again by 0.1 percent.

In three months to April, GDP expanded at a slower pace of 0.3 percent after climbing 0.5 percent in the first quarter.

In April, industrial production declined for the first time this year on sharp fall in manufacturing. Production decreased 2.7 percent month-on-month, reversing a 0.7 percent rise in March and bigger than the expected 1 percent drop.

Manufacturing output contracted 3.9 percent on month, in contrast to a 0.9 percent rise in March. This was the biggest fall since June 2002 and larger than the forecast of 1.4 percent decrease.

On a yearly basis, industrial production fell 1 percent after expanding 1.3 percent a month ago. Likewise, manufacturing slid 0.8 percent following a 2.6 percent rise in previous month.

Economists had forecast industrial output to grow 0.9 percent and manufacturing to climb 2 percent.

Another report from ONS showed that the visible trade deficit narrowed to a six-month low in April. The trade gap fell to GBP 12.1 billion in April from GBP 15.4 billion in March.

At the same time, the trade in services showed a surplus of GBP 9.37 billion. Consequently, total trade deficit narrowed to GBP 2.74 billion from GBP 6.15 billion a month ago.

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

The pound weakened to near a 5-month low of 0.8906 against the euro, after rising to 0.8880 at 4:00 am ET. The pound may test support around the 0.90 level, if it drops again.

The U.K. currency depreciated to a 4-day low of 1.2685 against the greenback, from a high of 1.2735 seen at 6:00 pm ET. The currency is seen finding support around the 1.24 region.

After rising to near a 2-week high of 138.25 against the yen at 4:00 am ET, the pound reversed direction with the pair trading at 137.79. The currency is likely to target support around the 136.00 area.

Data from the Cabinet Office showed that Japan's gross domestic product gained a seasonally adjusted 0.6 percent on quarter in the first three months of 2019.

That's an upward revision from 0.5 percent in last month's preliminary reading, and it was in line with expectations.

The pound declined to a 5-day low of 1.2562 against the Swiss franc, following an advance to 1.2608 at 4:00 am ET. On the downside, 1.24 is possibly seen as the next support level for the pound.

Looking ahead, Canada housing starts for May and building permits for April are scheduled for release in the New York session.