Sterling recovered from this week's record lows versus the euro on Wednesday, as investors took profits after dumping the currency for much of the year so far on expectations of slowing growth and lower interest rates.
UK data showing a bigger than expected reduction in the number of people claiming unemployment benefit and slightly higher than forecast wage inflation did little to alter the outlook for Bank of England monetary easing. But analysts said markets may have got too aggressive in pricing in over 100 basis points worth of interest rate cuts by year-end, leaving some scope for a recovery in sterling which has fallen over two percent on a trade-weighted basis since the start of the year.
By 1449 GMT, the euro was down a quarter of a percent at 75.22 pence, retreating from Tuesday's record high of 76.13 pence. The pound climbed 0.3 percent to $1.9701, more than two cents above last week's 10-month trough. It also recovered versus the yen after setting fresh 1-1/2 year lows at 207.07 yen.