Investing.com - The pound retreated from two-month highs against the dollar on Tuesday after data showed that U.K. economic growth slowed more sharply than expected in the first three months of the year.
GBP/USD hit lows of 1.5177 immediately following the release of the data and was last at 1.5212 from around 1.5225 ahead of the data. Sterling hit highs of 1.5260 earlier Tuesday, the most since March 6.
The Office of National Statistics said gross domestic product expanded 0.3% in the three months to March, slowing from 0.6% in the final quarter of 2014. It was the slowest rate of growth since the fourth quarter of 2012.
The consensus forecast among economists was for a more moderate slowdown to 0.5%.
On a year-over-year basis the U.K. economy grew 2.4%, below expectations for 2.6% after growth of 3.0% in the last three months of 2014.
Growth in Britain's dominant services sector slowed to 0.5% from 0.9% in the previous quarter the ONS said, led lower by the slowest growth in business services and finance since late 2010.
Industrial output dipped 0.1% and construction output contracted by 1.6%.
The drop in the pound came as the data indicated that the Bank of England is likely to leave interest rates on hold at current record lows of 0.5% for longer.
Investors were looking ahead to the outcome of the upcoming U.K. general elections on May 7, which could result in a hung parliament and an unstable coalition government, which could act as a drag on growth.
Sterling was also lower against the euro, with EUR/GBP up to 0.7166 from 0.7136 earlier.
The euro found support after Greek Prime Minister Alexis Tsipras on Monday reshuffled the team handling talks with the country’s international lenders, fuelling optimism that a deal will be reached by early May.
Traders were looking ahead to the S&P/Case Shiller housing index and a report on U.S. consumer confidence later in the day for further indications on the strength of the recovery, ahead of Wednesday’s Federal Reserve policy announcement.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was last at 96.84.