The British pound hovered above $1.29 on Tuesday as traders awaited an update on Brexit talks between London and Brussels and data on the health of Britain's labour market. While economic data has taken on less importance in recent months as the scheduled departure date for Brexit of March 29 approaches, investors will still be keenly watching for signs of any more wage pressures in the December labour market data, due at 0930 GMT.
The Bank of England has said it wants to see wage inflation pressures before it raises interest rates again, although markets have pared back their expectations for tightening this year given the uncertainty over the sort of Brexit Britain is headed for. "Our economists are in line with consensus looking for another healthy employment gain after last month's +141k, with the unemployment rate holding at 4 per cent. Despite that, there could be a dip in wage growth this month," RBC Capital Markets said in a note.
Economists are forecasting a gain of 140,000 jobs in December, according to a Reuters poll, and average weekly earnings over a three-month period of 3.5 per cent. Sterling slipped 0.1 per cent to $1.2915, while versus the euro it fell 0.1 per cent to 87.59 pence per euro.
With just six weeks until Britain is due to leave the bloc, Prime Minister Theresa May is yet to win ratification of British lawmakers for her Brexit deal - and the nervousness out what happens is weighing on sterling. British opposition Labour leader Jeremy Corbyn will on Tuesday urge the government to adopt his party's Brexit plan for a permanent customs union with the European Union, ahead of a visit to Brussels.
May and her government have repeatedly said membership of a customs union would prevent it having an independent trade policy - something they have promoted as one of the main economic benefits of leaving the bloc.
(With inputs from agencies.)