Stronger-than-forecast employment data failed to give a definitive lift to sterling in the aftermath of Tuesday´s inflation report.
Official figures showed the UK economy added another 122,000 jobs in March, significantly beating expectations. UK unemployment fell to 4.6% from 4.7%, its lowest level in 42 years.
The news served to provide some support for the pound, which had come under pressure following Tuesday´s inflation report. UK inflation rose to 2.7% in April versus 2.3% for the prior month.
Sterling appeared on course to lose further ground against the euro following Tuesday´s weakness.
Despite the oft-lauded fears of an imminent Brexit-related slowdown, the latest jobs figures indicate that the UK economy remains in expansion mode.
While this should be good news for the UK government as it prepares to fight a general election on 8 June, there is reason for caution. Data released today also showed average weekly earnings excluding bonuses were lagging inflation in the three months to the end of March.
Sterling remains relatively volatile; it has become dominated by political events in the aftermath of the shock Brexit vote, which led to a sharp sell-off last year.
At the same time, the pound was also bruised by yesterday´s inflation report, as it slipped to a five-week low against the euro.
The large number of companies listed on the UK market with revenues and earnings coming from overseas means that UK stocks tend to benefit when the pound weakens. Big UK-based names such as British American Tobacco are among the key beneficiaries of sterling weakness since the Brexit vote in June 2016.
While the pound was down by around 0.2% against the euro in afternoon trade, sterling made gains against the dollar. The latter sold off after fresh political controversy engulfed the Trump administration.