Sterling falls against euro, rises versus dollar as traders focus on trade war

By Lucy Raitano

LONDON(Reuters) - The pound fell versus the euro and rose versus the dollar on Friday, reflecting a sell-off in U.S. assets as traders flee to safe-haven currencies amid an escalating global trade war, while better-than-expected UK GDP figures barely moved the dial.

At 1004 GMT, the pound was 1% higher versus the dollar at $1.30950, and 0.5% lower versus the euro at 0.8675.

Heavy dollar selling has seen the greenback plunge versus a range of currencies, as investors' confidence in the world's largest economy flags.

Safe-haven currencies such as the Swiss franc and euro are meanwhile at multi-year highs as traders dump U.S. assets.

"The story with sterling it is more sensitive to risk sentiment than the euro ... and it's less liquid than the euro, in general it makes sense in these conditions to have euro/sterling move higher. When it comes to cable, it is just a dollar story," Francesco Pesole, FX strategist at ING, said.

Earlier on Friday, official figures showed Britain's economy returned to growth in February with its fastest expansion in 11 months, beating economists' expectations.

The pound barely moved on the news as attention remained squarely on tariff-related developments, with China slapping additional tariffs on the U.S. on Friday morning in a further escalation of the trade war.

One additional factor weighing on sterling is the gilt market, Pesole said.

"At a moment where bond market instability is driving outflows from the U.S. dollar in the U.S., markets are looking at bond market instability in the UK," he said.

Thirty-year gilt yields plunged 16.8 bps on Thursday - their biggest daily drop in over two years - but on Friday resumed the upward climb seen since Trump's tariffs roiled markets.

(Reporting by Lucy Raitano; Editing by Editing by Alison Williams)