Pound Drops Amid Falling European Shares

The pound fell against its major counterparts in the European session on Friday, as worries about rising U.S.-China tensions and tighter Covid-19 restrictions coming into force around Europe dampened risk sentiment.

German Chancellor Angela Merkel wants a "mega-lockdown" after the country suffered its deadliest-ever day of the coronavirus pandemic on Thursday.

The French government will tighten its border control with non-EU countries including the UK from Monday and moved forward the night curfew by two hours to 6 p.m. for at least a fortnight.

Optimism over Biden's coronavirus rescue plan receded, as it could be opposed by many Republicans.

In economic releases, official data showed that Britain's economy contracted at a slower than expected pace in November.

Gross domestic product shrank 2.6 percent month on month in November but slower than the 5.7 percent fall economists' had forecast.

The pound weakened to 1.2163 against the franc and 1.3637 against the greenback, after rising to 1.2101 and 1.3698, respectively in early deals. The pound may locate support around 1.18 against the franc and 1.34 against the greenback.

The pound reached 0.8901 against the euro, falling from more than a 2-month high of 0.8866 seen at 3:00 am ET. Should the pound slides further, 0.92 is likely seen as its next support level.

The pound slipped to a 3-day low of 141.38 against the yen, after a rise to 142.12 at 6:30 pm ET. Further decline in the pound may find support near the 138.00 mark.

Looking ahead, U.S. PPI, retail sales and industrial production for December, business inventories data for November and University of Michigan's preliminary consumer sentiment index for January will be featured in the New York session.