Forex – Sterling pares gains after UK GDP revised lower

The pound pared back gains against the dollar on Thursday after data showing that Britain’s economic growth in the first quarter was weaker than initially estimated.

GBP/USD was trading at 1.2986 by 08.51 GMT, up 0.12% for the day from around 1.2995 earlier.

The Office for National Statistics reported that gross domestic product was revised down to 0.2% in the three months to March from the first estimate of 0.3%. It was the weakest growth since the first quarter of 2016.

The dominant UK service sector grew by just 0.2%, down from the initial estimate of 0.3% as consumer spending was hit by rising inflation, due to the weaker pound.

Against the euro, sterling was little changed, with EUR/GBP at 0.8657,from around 0.8651 earlier.

Meanwhile, the U.S. dollar remained on the defensive after the minutes from the Federal Reserve’s latest meeting tempered some more hawkish rate hike expectations.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, dipped 0.1% to 96.85.

Fed officials agreed they should hold off on raising interest rates until it was clear a recent U.S. economic slowdown was temporary, though most said a hike was coming soon, minutes from their last policy meeting showed on Wednesday.

The minutes did little to alter investors’ expectations for a June rate hike but indicated a greater degree of caution among officials towards future rate hikes.

The dollar has already come under pressure in the past week as expectations for fiscal stimulus under the Trump administration have faded amid political turmoil in Washington.

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