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Pound Falls As U.K. Trade Deficit Widens, Industrial Output Contracts

The pound weakened against its major counterparts in the European session on Friday, as the nation's visible trade deficit widened in December and industrial production declined due to the outage of the North Sea Forties pipeline.

Data from the Office for National Statistics showed that the visible trade deficit rose to GBP 13.57 billion in December from GBP 12.45 billion in November. The expected level of shortfall was GBP 11.55 billion.

Separate data showed that U.K. industrial output decreased 1.3 percent month-on-month in December, which was the first fall in nine months. Economists had forecast output to fall 0.9 percent after expanding 0.3 percent in November.

Meanwhile, manufacturing output grew 0.3 percent, faster than the 0.2 percent rise seen in November. The rate came in line with expectations.

Investor sentiment faded amid worries over rising bond yields and budget disputes in Washington.

The currency was higher against its most major counterparts in the Asian session after the Bank of England hinted at somewhat earlier and deeper-than-expected rate hikes to tackle stubbornly high inflation.

The pound retreated to 151.58 against the yen, from a high of 152.76 hit at 3:45 am ET. The pound is likely to find support around the 150.00 level.

Data from the Ministry of Economy, Trade and Industry showed that Japan's tertiary activity index decreased unexpectedly at the end of the year, though slightly.

The tertiary activity index dropped 0.2 percent month-over-month in December, reversing a 1.1 percent rise in November. Meanwhile, economists had expected a 0.2 percent increase for the month.

Pulling away from an early high of 1.3987 against the greenback, the pound edged down to 1.3883. The next likely downside target for the pound is seen around the 1.37 level.

The pound eased back to 1.3015 against the Swiss franc, after advancing to 1.3125 at 2:45 am ET. If the pound falls further, 1.28 is seen as its next downside target level.

Data from the State Secretariat for Economic Affairs showed that Switzerland's unemployment rate remained unchanged in January.

The jobless rate came in at seasonally adjusted 3.0 percent in January, the same rate as seen in December.

The pound reversed from an early high of 0.8779 against the euro, dropping to 0.8829. The pound is seen finding support around the 0.90 area.

Looking ahead, Canada jobs data for January and U.S. final wholesale inventories for December will be out in the New York session.

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