Sterling inches higher after UK jobs figures beat expectations

The pound rose 0.17% against the dollar after stronger-than-expected British employment data showed a lower unemployment rate and steady annual wage growth.

The pound rose slightly on Thursday, recovering ​from a sharp drop to ​a two-month low the day before, ‌after British ​employment data came in stronger than expected. Sterling was last up 0.17% at $1.332, after sliding 1% on Wednesday when U.S. ‌Federal Reserve policymakers signalled they could hike interest rates this year.

The euro was up 0.05% against the pound at 86.54 pence, suggesting much of sterling's rise against the dollar was a ‌bounce from Wednesday's sharp fall. Economic data on Thursday showed the UK unemployment rate fell ‌to 4.9% in the three months through April, down from 5% previously.

The number of people in payrolled employment rose by 2,000 in May, the data showed, while annual wage growth excluding bonuses remained at ⁠3.4%, stronger ​than the 3.2% ⁠economists predicted. The growth in pay will be closely watched by the Bank of England, which is widely expected ⁠to hold interest rates at 3.75% later on Thursday.

"The fact that wage growth came in a ​bit stronger today will certainly interest the hawks on the Monetary Policy Committee, but ⁠we think it is unlikely the Bank delivers the same kind of hawkish message as the U.S. Fed ⁠last ​night," said Luke Bartholomew, deputy chief economist at Aberdeen. April's dramatic 100,000 drop in payrolled employees was revised to a still-sharp decline of 53,000.

"On the face of it, ⁠the latest UK jobs report doesn’t look so bad," said James Smith, developed markets ⁠economist at ING. "But ⁠the details still look dovish for the Bank of England. And the report is another reminder that the case for higher rates is ‌far from ‌the clear cut."