Dollar firms after GDP data, sterling shaken by polls

NEW YORK (Reuters) - The dollar rose on Friday after upbeat U.S. gross domestic product data, while sterling suffered its worst fall since mid-January after a poll showed a narrowing lead for the ruling Conservatives before elections next month.

The dollar index .DXY, which tracks the greenback against six major rivals, was up 0.18 percent to 97.423, after rising to a one-week high of 97.548, earlier in the session.

The U.S. economy slowed less than initially thought in the first quarter. Gross domestic product increased at a 1.2 percent annual rate instead of the 0.7 percent pace reported last month, the Commerce Department said on Friday.

“The GDP figure was a pleasant surprise. I don’t think markets were looking for a revision this big,” said Sireen Harajli, FX strategist at Mizuho in New York.

“It confirms or at least gives some relief to the idea that the weakness that we had seen in economic performance is likely to be transitory.”

The greenback weakened earlier this week after minutes of the Federal Reserve’s most recent meeting showed policymakers agreed they should hold off on raising interest rates until it was clear a recent U.S. economic slowdown was temporary.

The dollar was down 0.55 percent against the yen to 111.2 yen after paring earlier losses and the euro slipped to a 1-week low of $1.1161 against the greenback.

Trading was very light ahead of a holiday weekend.

“It’s hard to make anything out of yesterday’s and today’s price action. We have to wait till markets get to full liquidity next Tuesday,” said Win Thin, global head of emerging markets currency strategy at Brown Brothers Harriman in New York.

Sterling dived about one percent against the dollar to a 1-month low of $1.2776 after a YouGov poll published on Thursday showed British Prime Minister Theresa May’s lead narrowing to just 5 percentage points over the Labour opposition less than two weeks before a general election.

The assumption that a landslide election win for May would strengthen her hand over hardline Brexiteers in her ruling party and allow her to negotiate a smoother departure from the European Union, has given sterling a near 4 percent bump since she announced the election.

That view, however, has been challenged by recent polls.

Meanwhile, the Canadian dollar and its New Zealand counterpart recovered ground against the greenback after slipping sharply on Thursday on weakness in commodities, including crude oil.

Reporting by Saqib Iqbal Ahmed; Editing by Chizu Nomiyama