The pound dropped on slower British economy

27.04.2016

On Wednesday, the pound lost its previous gain against the dollar after data showed that the UK economic growth slowed in the first three months of this year.

GBP/USD pair was traded at 1.4573, retreating from recent highs 1.4619.

Sterling also slightly changed against the euro: EUR/GBP pair is at 0.7750 after previous high of 0.7784.

According to the report of the Office of National Statistics, the UK economy grew in the three months to March by 0.4%, in line with economists' expectations, but slowed to 0.6% in the previous quarter.

As demonstrated by the data, the services sector was the only one which has shown growth in the first quarter, while the manufacturing sector, construction and agriculture have decreased.

The activity in the UK services sector grew by 0.6%, industrial production decreased by 0.4%, and construction activity declined by 0.9%.

On an annual basis, UK economic growth in the first quarter was 2.1%, similar to the previous quarter and slightly higher than the expected 2.0%.

The UK Chancellor, George Osborne, warned that the uncertainty about the potential of the country to secede from the European Union is putting pressure on the economy.

"It is good news that the UK economy continues to grow, but today there are signals that the threat of the Bexit is putting pressure on our economy", - he said.

Demand for the dollar fell as investors are preparing for a political decision by the Federal Reserve later in the trading session.

The Federal Reserve, which raised rates for the first time in nearly ten years in December, is expected to leave the current policy unchanged, but investors will pay attention to the statement on the bank's rate of finding indications of the likelihood of increasing interest on loans in June.

Meanwhile, a two-day policy meeting of the Bank of Japan ends on Thursday amid growing expectations of further easing from the central bank in recent days.

The USD Index, which tracks the greenback against a basket of six major rivals, is stable at 94.41.

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