Pound falls on GDP data, gilts rally

Pound fell and gilts rallied on Friday as the first estimate of UK Q1 GDP data came in weaker than market expectations.

Britain's economy grew at a slower pace than expected in the first three months of this year, as the harshest winter weather in 30 years hit retail and industrial production, official data showed on Friday.

The pound shed around 40 ticks versus the dollar to trade at $1.5345. Versus the euro it gave back around 30 ticks to hit a session low of 86.58 pence.

The June gilt future rallied to stand 8 ticks higher at 114.63, having been 4 ticks lower ahead of the data.

Britain's leading shares extended gains, up 43.63 points, or 0.7 percent at 5708.96, after UK GDP data.

Short sterling futures pared early losses to stand flat to three ticks lower across the strip.

"The data was short of expectations which had been building up in the past few weeks" said Kenneth Broux, market economist at Lloyds TSB in London.

"We're seeing initial selling in sterling. Given it has had a good week vs euro, there was always a risk of some profit taking."