POUND FALLS SHARPLY AFTER DISAPPOINTING DATA

The British pound declined sharply on Friday after government data showed weaker than expected factory output, raising fresh concerns about the post-Brexit recovery.

Factory data out of the United Kingdom largely disappointed the markets on Friday after the Office for National Statistics reported a 0.2% decline in manufacturing production for the month of May. That translated into an annualized gain of 0.4%.

Industrial production was also down 0.1% on month and 0.2% annually, official data showed.

Earlier in the day, a report on German factory output showed much stronger than expected growth for Europe’s largest economy. Industrial output rose at a seasonally adjusted 1.2% in May, following a revised gain of 0.7%, the Federal Statistics Office said in a report. That translated into an annualized gain of 5%. Analysts had forecast a monthly gain of 0.3%.

Meanwhile, French industrial output surged 1.9% from April, well above forecasts calling for 0.5% growth.

The US dollar index (DXY), a broad performance measure of the greenback against a basket of six currencies, rose 0.2% to 95.98.

The dollar held firm after the Labor Department reported better than expected payrolls data, alleviating concerns about a broad slowdown in the economy. US employers added 222,000 workers to payrolls last month, much higher than the 179,000 forecast by economists.

A stronger dollar weighed on commodity prices Friday, with precious metals failing to rally. Gold prices were trading near two-month lows and headed for weekly losses.

Gold normally trades inversely with the US dollar but has failed to capitalize on the recent plunge in the greenback. Last month, the dollar fell to pre-election lows against a basket of currencies – a move that failed to spur any major rallies for the yellow metal.

EUR/USD

The EUR/USD continued to gyrate around the 1.1400 level on Friday, with analysts forecasting a return to 1.1300 in the short term. The pair faces strong resistance near last week’s 14-month high, which corresponds with the 1.1450 region.

GBP/USD

The British pound reached a session low of 1.2890 during European trade and was last down half a percent against the dollar. The GBP/USD exchange rate faces immediate resistance at the daily low, followed by the 55-day simple moving average (SMA) of 1.2874. On the opposite side of the spectrum, immediate resistance is likely to be met at the 30 June high of 1.3032, followed by the 18 May high of 1.3051.

GOLD

Gold prices were last seen trading in the low $1,220.00 region, where it was testing two-month lows. Traders can expect further downside pressure for the yellow metal should the dollar continue to strengthen. However, most of the dollar’s rally attempts in recent weeks have come up short amid slow-growth worries.