Sterling rose on Tuesday as traders looked for progress in Brexit talks that British Prime Minister Theresa May will hold in Brussels this week, while relatively strong labour market data helped sentiment towards the currency.
May will meet EU Commission chief Jean-Claude Juncker in Brussels on Wednesday, pressing on with efforts to find a way to get their Brexit deal through Britain’s parliament.
With just six weeks until Britain is due to leave the bloc, May has yet to win the ratification from British lawmakers for her Brexit deal – investors remain nervous about the outcome but prepared to buy sterling on any sign of a breakthrough in talks with Brussels to tweak the deal.
After initially weakening on the labour market data, sterling was up 0.3 percent to as high as $1.2969 – its strongest since Feb. 8 – by 1430 GMT.
The pound also rallied 0.3 percent to 87.27 pence per euro.
Official data showed workers’ pay growth held at its fastest pace in a decade, at 3.4 percent, in late 2018, although the increase was slightly below a forecast for a pick-up to 3.5 percent in a Reuters poll of economists.
Economic data has assumed less importance in recent months as the scheduled Brexit departure date of March 29 approaches.
Despite wage growth rising, markets have pared back their expectations for Bank of England monetary policy tightening this year given the uncertainty over the sort of Brexit Britain is headed for.
“The most recent data on the UK labour market continues to be strong on the whole,” said David Cheetham, market analyst at online broker XTB.
“Looking at the bigger picture, the pound remains range bound and is seemingly awaiting further clarity on Brexit before embarking on a sustained move,” Cheetham added.
Concerns about Britain’s economy were underscored by Japanese carmaker Honda’s announcement on Tuesday that it would be closing its UK plant, leading to the loss of 3,500 jobs. Honda said the decision was unrelated to Brexit.
British opposition Labour leader Jeremy Corbyn on Tuesday said that his party was keeping all options open on Brexit, including another public vote.
Corbyn has urged the government to adopt his party’s Brexit plan for a permanent customs union with the EU, a proposal May has roundly rejected.
A group of seven Labour lawmakers quit the party on Monday, upset with Corbyn’s leadership, in a move analysts said would at the margins weigh on the pound because it made the possibility that the Labour party would push for a second referendum less likely.
