The pound declined against its key counterparts in early European deals on Monday, after a data showed that U.K. factory output contracted at the fastest pace in over six years in June, as factories reduced production due to weaker demand leading to an erosion of business confidence.

The seasonally adjusted IHS Markit/CIPS Purchasing Managers' Index, or PMI, dropped to 48 from 49.4 in May. Economists had expected the reading to improve modestly to 49.5.

The PMI fell for the third consecutive month and to its lowest level since February 2013. Further, the measure has been below the neutral mark of 50 for consecutive two month for the first time since early-2013.

Data from Bank of England showed that UK mortgage approvals declined in May and households' borrowing logged the weakest growth in two years.

The number of mortgages approved in May declined to 65,409 in May from 66,045 in April. Approvals were forecast to fall to 65,500.

Net mortgage borrowing by households fell to GBP 3.1 billion in May, the smallest increase since April 2017.

The quarterly economic survey from the British Chambers of Commerce showed that UK's underlying economic conditions stagnated in the second quarter.

The balance of manufacturing firms reporting improved domestic orders fell to a 7-year low of +4 in the second quarter from +9. Meanwhile, services firms' balance doubled to +10 from +5.

The currency was higher against its major counterparts in the Asian session, excepting the greenback.

The pound fell to an 11-day low of 1.2635 against the greenback, from a high of 1.2706 seen at 10:15 pm ET. The pound is seen finding support around the 1.24 region.

The pound edged lower to 136.75 against the yen, after rising to near a 3-week high of 137.79 at 6:45 pm ET. The next possible support for the pound is seen around the 133.00 level.

The latest quarterly Tankan survey from Bank of Japan showed that Japan large manufacturers confidence weakened to a three-year low in the second quarter as trade wars and weak global demand weighed on economic activity.

The big manufacturers' confidence index fell to +7 in June quarter from +12 in March quarter. The score was forecast to drop moderately to +9 Having climbed to a 10-day high of 1.2478 against the franc at 2:00 am ET, the pound reversed direction, falling as low as 1.2415. If the pound slides further, it may find support around the 1.23 level.

The pound depreciated to 0.8967 against the euro, moving off from a 6-day high of 0.8925 touched at 1:00 am ET. On the downside, 0.92 is possibly seen as the next support level for the pound.

Final data from IHS Markit showed that Eurozone manufacturing activity contracted for the fifth straight month in June, and the latest pace of decline was slightly more than initially estimated.

The factory Purchasing Managers' Index fell to a 3-month low of 47.6 in June from 47.7 in May. The score was slightly weaker than the earlier flash reading of 47.8.

Looking ahead, U.S. construction spending for May and ISM manufacturing index for June will be out in the New York session.

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