May 25, 2017 / 3:15 PM / 3 months ago

UPDATE 1-Sterling slips as Q1 growth numbers trail Europe

(Updates prices, adds market comment)

By Patrick Graham

LONDON, May 25 (Reuters) - Sterling edged lower against both the dollar and the euro on Thursday, after data showed Britain's economy slowed more than previously thought in the first quarter of this year.

The dip in growth of gross domestic product - just 0.2 percent compared with an earlier estimate of 0.3 percent - was minimal, but along with the more detailed breakdown of the numbers added to signs the economy is beginning to struggle a year after Britain's shocking vote to leave the European Union.

Most economists polled by Reuters had forecast the rate of growth would stay unchanged after marking a steep slowdown from the rapid 0.7 percent pace achieved in the final three months of 2016.

By contrast, Germany's economy grew by 0.6 percent and Spain's expanded by 0.8 percent in the first quarter. Adjusted for inflation, household spending saw its weakest rise since the final three months of 2014.

"The UK is now beginning to look like the sick man of Europe," said Kathleen Brooks, research director with City Index in London.

The pound, which hit a day's high of $1.3012 ahead of the data, had fallen 0.3 percent on the day by late afternoon in London, trading at $1.2936.

It dipped 0.2 percent to 86.63 pence per euro.

Jane Foley, a strategist with Rabobank in London, said it was telling that the pound has struggled to hold on to last week's break above $1.30 at a time when the dollar was racking up its worst weekly performance in more than a year.

"Dollar moves of the last few weeks provide an opening to find better levels but it does seem like the risks associated with a weakening UK economy and Brexit talks mean sterling is finding it difficult to take the opportunity," she said.

"$1.30 is a big psychological level and it is something the pound is finding it hard to hold on to."

The pound was also weakened by polls at the start of the week showing a halving of Prime Minister Theresa May's lead in campaigning for a June 8 election which has been interrupted by a bombing in Manchester.

Politicians were getting back on the road on Thursday, but news programmes continued to be dominated by coverage of the investigation into the attack and the fallout for victims.

Additional reporting by Ritvik Carvalho, Dhara Ranasinghe and Kit Rees, editing by Ed Osmond

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