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The British pound has weakened after data showed the UK's trade deficit widened, extending the losses of the previous days of the week, which had seen the Bank of England leaving policy rates unchanged, industrial output growth slowing and GDP estimates sliding.

The GBP/USD dropped to 1.6796, its lowest since 12 June, from the previous close of 1.6833. The pair was higher in early days of the week helped by better PMI numbers but is now down 0.15% from last Friday's close.

The sterling has dropped more than 2.1% over the past five weeks against the US dollar after seeing a near six-year high of 1.7190.

Data Prints

According to Friday's data, total trade balance for June showed a deficit of £2.459bn, more than the May level of £2.418bn and a market consensus of £2.364bn. The goods trade balance showed a deficit of £9.413bn, up from £9.150bn and compared to a market forecast of £8.800bn.

Industrial production growth slowed to 1.2% on a year-on-year basis in June from 2.3% in May, weaker than the market forecast of 1.5% growth.

Manufacturing production growth dropped to 1.9% from 3.7% in May while analysts had been expecting a more moderate fall to 2.1%.

Meanwhile, the National Institute of Economic and Social Research (NIESR) estimated in its August report that the UK's GDP growth would have slowed to 0.6% in the three months to July from 0.8% in the quarter to June.

"This (the July estimate) implies an annual rate of growth of around 3%. While the economy regained its pre-recession size recently, a significant negative output gap remains," the NIESR report said.

The think tank also said that it expects the BoE monetary policy committee to introduce the first interest rate hike in February 2015.

On Thursday, the BoE left the bank rate unchanged at 0.5% and the central bank's asset purchase target at £375bn.

Dollar Move

The past few weeks have also seen increased safety-seeking flows to the US dollar, weighing down riskier currencies like the pound.

The USD index, the gauge that measures the greenback's strength against a basket of currencies on a trade-weighted basis, is headed for its fourth straight week of gains.

The dollar index touched an eleven-month high of 81.71 earlier this week before edging back on profit-taking to 81.40.

Increasing fears that Russia is preparing to invade Ukraine and the continuing Israel-Gaza conflict have added to the risk averseness of investors, helping the US dollar.

Technical Outlook

The GBP/USD has its first support at 1.6690, which looks to be a strong one. Next two levels on the downside are 1.6610-1.6460 ahead of the more important 1.6630-1.6250 region.

On the higher side, 1.6890 has become the first level of resistance ahead of the 1.7000 mark. Then comes 1.7060 as a level to watch ahead of a retest of the July high of 1.7190.

GBP/USD Daily
GBP/USD DailyIB Times UK/FXStreet