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Forex - Sterling edges lower after U.K. growth figures

Published 05/26/2016, 05:12 AM
Updated 05/26/2016, 05:12 AM
© Reuters.  Sterling dips as UK business investment falls ahead of EU referendum

© Reuters. Sterling dips as UK business investment falls ahead of EU referendum

Investing.com - The pound edged lower on Thursday after data confirming that the British economy grew 0.4% in the first three months of this year, but business investment unexpectedly fell ahead of the European Union referendum.

GBP/USD was last at 1.4687, down from around 1.4722 ahead of the data.

The Office of National Statistics said gross domestic product growth slowed to 0.4% in the three months to March, in line with the preliminary estimate, from 0.6% in the previous quarter.

The annual rate of growth was revised down to 2.0% from 2.1% initially, the ONS said.

The report showed that business investment fell during the quarter for the first time in three years amid uncertainty over an upcoming referendum on Britain’s EU membership.

Business investment fell by 0.5%, driven by “falls in non-residential building”, after rising 3.0% in the fourth quarter of 2015.

Economists had expected business investment to rise by 0.1%.

Household spending ticked up to 0.7% in the first quarter, the ONS said.

Service sector output rose by 0.6% during the last quarter, but construction output fell 1.0% and manufacturing output was down by 0.4%.

Sterling moved lower against the euro, with EUR/GBP rising 0.17% to 0.7684 from around 0.7588 ahead of the data.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.18% to 95.23, moving back from Wednesday’s two-month highs of 95.66.

The dollar eased against most of the other major currencies as investors looked ahead to remarks by Federal Reserve Chair Janet Yellen on Friday for clues about whether the central bank could soon hike interest rates.

The dollar has strengthened in recent sessions on the back of upbeat economic reports and comments from some Fed officials indicating that the central bank could raise interest rates at its next policy meeting in June.

Higher rates are positive for the dollar because they make the U.S. currency more attractive to yield-seeking investors.

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