LONDON: Sterling jumped to a 2-month high against the euro on Tuesday after strong employment data suggested Britain's labour market remained robust despite an economic slowdown ahead of Brexit.
The pound slumped 7 percent in 2018 on Brexit concerns but it has started the year on the front foot with some investors viewing medium-term sterling valuations as decently priced.
The British currency rose half a percent on Tuesday and neared $1.30 after data showed British workers' pay grew at the fastest pace in over 10 years.
The figures encouraged traders, who believe that a disorderly no-deal Brexit can be avoided, to buy the pound.
"The market is recognising that parliament will not allow the UK to leave Europe without a deal... today's data will bolster the chances of a Bank of England interest rate hike as soon as May," said Kallum Pickering, an economist at Berenberg.
But with little time left until Britain leaves the EU on March 29, there is no agreement in London on how it should exit the world's biggest trading bloc. The chance of a "no-deal" exit with no provision to soften the economic shock persists.
"The earnings figures have been somewhat overshadowed by continued Brexit chaos. Investors are focused on how PM Theresa May will negotiate with the EU over the next few days," said Tyler Griffin, a currency specialist at OFX.
Sterling firmed on Monday after British Prime Minister Theresa May sought to break a parliamentary deadlock over Brexit by proposing to seek further concessions from the European Union.
At 1630 GMT, sterling was up half percent at $1.2957 . The British currency has traded within a tight range of $1.28-$1.30 for most of January.
Against the euro, the pound traded up 0.6 percent at 87.61 pence, its highest since November.
Despite the uncertainty, some sterling traders see brighter times ahead for the currency citing overly negative market positioning and a weakening dollar.
"The overall probability of a market-friendly Brexit outcome is currently helping sterling," said Chris Turner, head of foreign exchange strategy at ING in London.
The pound is trading roughly in the middle of its trading range over the last two years.
Last week, May's deal suffered a massive defeat in parliament but she won a subsequent vote of confidence by a narrow margin with the backing of the small Northern Irish party that props up her minority government.