Sterling falls below $1.30 ahead of third-quarter GDP data

Sterling slipped on Friday, heading towards $1.30 as a resurgent dollar reduced some of the recent Brexit optimism and traders prepared for third-quarter British economic growth numbers.

The pound has traded as high as $1.3176 this week, a three-week high, after Britain appeared to be edging towards clinching an exit deal with the European Union.

But work remains to be done before an agreement is reached, with both sides struggling to decide on a mechanism for avoiding a hard border separating Northern Ireland and Ireland.

The Northern Irish party which props up Prime Minister Theresa May's government said on Friday that her negotiations had raised alarm bells and that it would not support a Brexit deal that divided the United Kingdom.

Sterling fell 0.4 percent to as low as $1.3005, back to levels it stood at on Monday, with much of the fall coming after investors flooded into dollars. That move followed the U.S. Federal Reserve reiterating that it would stick to interest rate tightening in the face of a strengthening labour market.

The pound was also down versus the euro, by 0.2 percent to 87.15 pence per euro.

Third-quarter GDP numbers are expected to show a 0.6 percent rise from the previous three months, according to a Reuters poll of analysts, versus a 0.4 percent increase in the prior quarter.

"Consensus already expects a strong 0.6 percent QoQ (quarter on quarter) and UK rates have already risen after the central bank press conference last week," ING analysts said.

"Unless we see a 0.7 percent QoQ print or higher, it will be difficult to see GBP/USD push towards $1.3200," they said, citing the Brexit uncertainty that will limit any further repricing of future rate rises.

Money markets are currently pricing in one 25 basis-point hike from the Bank of England in 2019.