Investing.com - The pound swung between small gains and losses against the dollar on Tuesday, after preliminary data showed that the U.K. economy grew in line with expectations in the fourth quarter.
GBP/USD hit 1.6626, the highest since Friday and was last up just 0.02% to 1.6585. The pair touched session lows of 1.6552 immediately following the release of the data.
Cable was likely to find support at 1.6472, Monday’s low and resistance at 1.6667, Friday’s high and an almost two-and-a-half year high.
The Office for National Statistics said the U.K. economy grew 0.7% in the final three months of 2013, slightly down from growth of 0.8% in the previous quarter, and expanded 2.8% from a year earlier.
On an annual basis, U.K. gross domestic product was 1.9% in 2013, up from just 0.3% the previous year, the fastest annual rate of growth since 2007.
The ONS said the U.K. service sector grew by 0.8% in the fourth quarter, while the manufacturing sector expanded 0.9%. Meanwhile, production rose 0.7%, while construction output fell 0.3%.
The data looked likely to add to uncertainty over the Bank of England’s forward guidance, after data last week showing a sharper than expected drop in the U.K. unemployment rate heightened expectations that the central bank will raise interest rates sooner than anticipated.
Demand for the dollar continued to be supported by expectations that the Federal Reserve will continue to scale back stimulus measures at this week’s policy meeting.
Investors were anticipating Wednesday’s policy statement by the Fed amid expectations that the bank will cut its asset purchase program by another $10 billion, to $75 billion per month. The central bank announced the first cut to its stimulus program in December.
Concerns over the impact of the Fed tapering stimulus, along with fears over a possible slowdown in China fuelled a broad based selloff in emerging currencies in recent sessions.
Sentiment on emerging market currencies remained fragile ahead of an emergency meeting of Turkey’s central bank later Tuesday. Turkey’s lira spiraled to new lows against the dollar on Monday, sparking widespread risk aversion.
Elsewhere, sterling was slightly higher against the euro, with EUR/GBP slipping 0.15% to 0.8231.