Investing.com - The pound rose to the day’s highs on Thursday after figures showing that the U.K. economy grew in line with expectations in the fourth quarter, but the annual rate of growth slowed to the weakest in three years.
GBP/USD rose 0.63% to 1.4324 from around 1.4253 ahead of the report.
The Office for National Statistics said fourth quarter gross domestic product grew 0.5%, matching forecasts after growth of 0.4% in the three months to September.
The service sector, which accounts for around 80% of GDP, grew by 0.7% in the last quarter, but the production sector shrank by 0.2%, with manufacturing output flat. Construction output fell 0.1%, the ONS said.
The U.K. economy grew at an annual rate of 1.9% in the three months to December, slowing from 2.1% in the third quarter and the smallest increase since early 2013.
The pound has recently fallen to seven-year lows against the dollar, pressured lower by concerns over a slowdown in China and the broader global outlook.
Sterling has come under additional pressure amid uncertainty over a looming referendum on Britain’s membership of the European Union.
Recent comments by Bank of England Governor Mark Carney, who said earlier this week that the conditions are not yet in place for a rate hike, have also weighed.
The dollar remained supported after the Federal Reserve said it is “closely monitoring” the global economy as it left interest rates on hold at the outcome of its January meeting.
The Fed left interest rates unchanged on Wednesday, after raising interest rates for the first time in nearly a decade in December.
The U.S. economy is still on track for moderate growth and a stronger labor market even with "gradual" rate increases, the bank said.
Policymakers acknowledged heightened uncertainty over the global economic outlook after recent turmoil in financial markets.
“The Committee is closely monitoring global economic and financial developments and is assessing their implications for the labor market and inflation, and for the balance of risks to the outlook,” the Fed statement said.
Meanwhile, sterling was lower against the euro, with EUR/GBP down 0.3% to 0.7630 from 0.7660 ahead of the data.