Sterling slipped on Tuesday after a newspaper report that Brexit talks between Prime Minister Theresa May’s government and the opposition Labour Party were stalling, but moves were broadly contained in a market lacking fresh triggers.
The report was subsequently dismissed by a Labour Party spokesman, but the pound held near the day’s lows despite robust jobs data.
In currency derivative markets, expectations for volatility in the British pound plummeted to their lowest levels in more than a year on Tuesday after European Union leaders and the British government last week announced Brexit would be delayed for up to six months.
Sterling implied volatility gauges slipped across the board, extending a recent decline, to their lowest levels since January 2018, as no significant Brexit-related developments were expected this week.
Strong jobs data failed to pump any life into a lacklustre trading session.
Total earnings, including bonuses, rose by an annual 3.5 percent in the three months to February, the Office for National Statistics said, matching the median forecast in a Reuters poll of economists. It was the joint highest rate since mid-2008.
“The encouraging data may fuel some confidence in sterling, however any significant movements will likely be muted as politics remains the key focus and we approach the Easter break,” said Sam Cooper, a vice president at Silicon Valley Bank.
The pound edged lower to $1.3070 against the dollar and weakened 0.25 percent against the euro to 86.49 pence.
Valentijn van Nieuwenhuijzen, CIO at NN Investment Partners which manages 246 billion euros (£212 billion) in assets, said he was steering clear of bets on the pound and only taking positions to hedge overall portfolio risks due to the political uncertainty.
Investor surveys also highlighted that uncertainty. A monthly survey by Bank of America Merrill Lynch found the UK was the least favoured region among global money managers with investors broadly underweight on UK stocks.