Pound Slides Amid Risk Aversion On Tariff Worries

The pound slipped against its major opponents in the European session on Friday, as U.K. political uncertainty continued and European stocks declined on weak manufacturing data from China as well as the latest announcement of U.S. tariffs on Mexico.

U.S. President Donald Trump has announced new tariffs on all goods coming from Mexico to curb illegal immigration across the border to the U.S.

In a tweet, Trump said that from 10 June a 5 percent tariff would be imposed and would slowly rise until the situation is resolved.

China's manufacturing activity declined in May for the first time in three months, raising fresh concerns about the growth outlook.

Data from Nationwide Building Society showed that U.K. house prices increased at a slower pace in May.

House prices grew 0.6 percent year-on-year in May, slower than the 0.9 percent increase seen in April. Economists had forecast a faster growth of 1.2 percent.

Meanwhile, data from the Bank of England showed that UK mortgage approvals increased more-than-expected in April.

The number of mortgage approvals for house purchase, a leading indicator of mortgage lending, rose to 66,261 from 62,559 in March. The expected level was 63,500.

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

The pound dropped to a 4-1/2-month low of 1.2626 against the franc from Thursday's closing value of 1.2705. The pound is seen finding support around the 1.25 region.

The U.K. currency depreciated to 136.73 against the yen, its lowest level since January 4. If the pound drops further, 133.00 is possibly seen as its next support level.

The pound that closed yesterday's trading at 1.2605 against the greenback slipped to near a 5-month low of 1.2572. The pound is likely to test support around the 1.24 region.

The pound weakened to 0.8868 against the euro, a level unseen since January 17. Next key support for the pound is seen around the 0.90 level.

Data from Destatis showed that Germany's retail sales rebounded in April from last year driven by the timing of Easter.

Retail sales rebounded at a faster-than-expected pace of 4 percent annually in April, reversing a 2 percent fall in March. Sales were forecast to grow moderately by 1.3 percent.

Looking ahead, German flash inflation data for May is due at 8:00 am ET.

In the New York session, Canada GDP data for March and industrial product price index for April, as well as U.S. personal income and spending data for the same month and University of Michigan's final consumer sentiment index for May will be out.