LONDON (Reuters) - Sterling skidded on Friday, hitting a one-week low against the euro after data showed Britain's economy recorded its weakest annual growth since 2013 in the second quarter of the year.
The pound fell to $1.3357 after the data release from $1.3423 before, leaving it 0.6 percent lower on the day. Against the euro, it slipped to 88.35 pence, down 0.8 percent on the day.
"Today's GDP figure delivered a stark warning of the trouble that lies ahead for the UK," said Anthony Kurukgy, Senior Sales Trader at Foenix Partners.
"The last time the UK GDP figure read 1.5 percent was almost four years ago in an economy that was moving away from the shadows of the 2008 financial crisis. A modern-day crisis now hangs over the UK economy."
Friday's data showed year-on-year gross domestic product growth slowed to 1.5 percent in the second quarter from 1.8 percent in the first three months of the year.
The pound was already on the back foot after Bank of England Governor Mark Carney said on Thursday that the economy was on track for an interest rate rise in the "relatively near term". That cooled expectations of a hike in November, when the Bank releases its next quarterly Inflation Report.
Sterling nevertheless remains on track for its strongest month against the dollar in 2-1/2 years, after climbing more than 3 percent since the start of September on expectations the BoE would raise interest rates before the end of the year.
Carney had said at September's policy meeting that a hike was likely to come over the "coming months".
Most economists now expect the BoE to raise its Bank Rate to 0.50 percent from 0.25 percent at its next policy meeting on Nov. 2.
Carney's tone this week has been more cautious than at the last BoE meeting, however. On Thursday he said the Bank could not by itself nullify the hit to the economy from Brexit.
Sterling was lifted on Thursday by signs of progress in divorce negotiations between Britain and the EU, with the bloc's chief negotiator Michel Barnier Barnier saying the two sides had "had a constructive week", though they were "not there yet.
"In light of recent favourable developments, we judge that upside risks for the pound are building heading into year-end," wrote MUFG currency economist Lee Hardman in a note to clients.
(Reporting by the London Markets team; Writing by Jemima Kelly; Editing by Saikat Chatterjee and Catherine Evans)