LONDON, Feb 10 (Reuters) - Sterling jumped above $1.25 on Friday after data showed UK industrial output rose more than expected in December and the trade deficit was narrower than forecast, allaying fears of a slowdown as the Brexit process gathers pace.
The pound traded as high as $1.2515 from around $1.248o just before the data, while the euro slid around 20 ticks to 85.03 pence.
British government bond futures modestly extended losses, dropping as low as 125.61 at 0931 GMT, 35 ticks down on the day and about 10 ticks lower than where they were trading before the data.
British manufacturing grew 1.2 percent in the October-to-December period from the previous three months, helped by a 2.1 percent jump in December. The goods trade deficit fell to 10.89 billion pounds in December, narrower than a forecast of 11.5 billion pounds in the Reuters poll.
"Overall these data points indicate healthy levels of performance in their respective sectors," said David Cheetham, market analyst at XTB.
"And with the pound already higher across the board this week, there could be another leg up before traders break for the weekend," he said. (Reporting by Jamie McGeever; Editing by Patrick Graham)