The pound had been stuck in a tight trading range while edging lower in recent weeks as investors sit on the sidelines during the leadership contest to succeed Theresa May as leader of the Conservative party and country.

Monday's worse than expected data, which showed the British economy shrank 0.4% in April, added to the pound's worries, and at 0830 GMT employment and wage growth data will be released.

A Reuters poll of economists expect wage growth in the three months to April to come in at 3% year-on-year, down from 3.2% in March. Wage growth is outstripping inflation and the Bank of England has said it will need to raise interest rates - probably faster than the market expects - to keep price growth close to its 2% target.

Still, investors have mostly ignored economic data releases in Britain recently, believing the BoE is unlikely to act until Britain decides how, when and even if it leaves the European Union. The United Kingdom is scheduled to exit the bloc on Oct. 31.

The pound dropped to as low as 89.325 pence per euro  in early trade, a 5-month low, before rebounding to 89.155 pence.

Against the dollar, sterling rose 0.1% to $1.2695, away from lows hit in late May but still firmly within its recent range.