LONDON: Sterling pared early gains against the dollar on Friday after data showed British industrial production and construction unexpectedly contracted in November, bolstering the view that economic growth is moderating.
Industrial output fell by 0.1 percent on the month in November, extending October's decline. A Reuters poll had forecast a 0.2 percent rise, month-on-month, and a 1.6 percent rise annually.
Construction output dropped by 2 percent on the month. Friday's data added to signs that Britain's economic recovery may be losing steam. That view has already prompted investors to push back expectations of when the Bank of England (BoE) will start to raise interest rates to next year.
Six months ago, many expected a move before the end of 2014.
Sterling slipped to $1.5125 from around $1.5145 before the two sets of data, still up 0.2 percent on the day. The pound hit a 18-month low of $1.5034 on Thursday and was on track for its fourth straight week of losses against the dollar.
The euro was down 0.1 percent at 78.10 pence, having traded at 77.99 pence before the data was released.
"Construction and industrial data are a further indication that domestic momentum is slowing," said Jameel Ahmad, chief market analyst at FXTM.
"This follows services, manufacturing and construction PMIs showing a slowdown in activity. That will further push back any pressure on the BoE to raise interest rates."
Adam Cole, head of G10 FX strategy at RBC Capital Markets, said the industrial production numbers combined with the weak construction output posed a downward risk to Britain's fourth-quarter gross domestic product.
Investors are also wary of the pound given rising political risks ahead of what is likely to be a closely fought parliamentary election in May. The election could pave the way for a referendum on whether Britain should stay in the European Union, if Prime Minister David Cameron's Conservative party are returned to power.
Traders said the focus would now shift to the U.S. non-farm payrolls data due later in the day. A Reuters poll forecasts the U.S. economy added 240,000 jobs in December, extending the longest run of job creation on record. That is likely to underpin the dollar and push the pound lower.
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