Sterling edges up; UK data shows softer jobs market

LONDON (Reuters) - The pound edged up on Tuesday, clawing back some gains from the euro in particular, as the volatility that has dominated markets for the past couple of weeks appeared to ebb.

On the macro front, data on Tuesday showed Britain's labour market showed signs of weakening in the run-up to this month's increase in a tax on employers.

However, wage growth remained strong, which creates a hurdle for the Bank of England. Markets show traders currently place a 90% change of a quarter-point cut when policymakers meet in early May and another two cuts after that.

The UK is not as exposed as other parts of the world to U.S. President Donald Trump's ever-shifting tariffs, like China and the European Union. But with the risk of a global recession rising fast as a full-on trade war unfolds, investor sentiment everywhere is deteriorating.

Sterling was last up 0.2% against the dollar at $1.1322 and gained against the euro, which fell 0.24% to 85.87 pence.

Analysts believe the labour market data will not derail the BoE from cutting interest rates at a rate of one per quarter.

"Rising real wages and the subsequent increase in purchasing power will likely favour additional caution from the BoE going forward. However, there is nothing in the report to suggest the BoE will not continue to cut rates gradually," strategists at BBVA said in a note.

The pound has risen by nearly 6% against the dollar so far this year, but has lost close to 4% against the euro, which has surged by nearly 10% since the start of the year, as investors have ditched U.S. stocks, bonds and the dollar and poured money into European markets.

"Euro/sterling is toying with 86.00 after reaching the highest levels since November 2023 on Friday at c.87.83. Given the absence of negative surprises in today’s macro data, we would expect additional profit-taking in the session ahead," BBVA said.

(Reporting by Amanda Cooper; Editing by Sharon Singleton)

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