The British pound rose against a broadly struggling dollar but fell against a stronger euro as the latest economic data suggested the cost-of-living squeeze had not yet hit demand for staff in the UK.
Data showed Britain's unemployment rate holding at 3.8% in the three months to May while the number of people in work rose by the most since the middle of 2021.
The drop against the euro is due to that currency's strength. It rose to its highest against the dollar in almost two weeks on Tuesday on news that European Central Bank (ECB) policymakers would discuss whether to raise interest rates by 25 or 50 points at their meeting on Thursday.
We're seeing some continuation of dollar downside that we saw on Friday and Monday, and equally today we're seeing some euro upside, largely on anticipation of the fact that the ECB might hike more than 25 bps.
As well as relative currency moves, politics is a main factor driving sterling.
The race to replace Boris Johnson as British Prime Minister has narrowed to four candidates, led by frontrunners Rishi Sunak and Penny Mordaunt.
The Bank of England (BoE) is struggling against soaring inflation and a cost-of-living crisis, having raised interest rates five times since December as it has tried to halt a surge in inflation from becoming embedded in the economy.
With diverging approaches to fiscal policy, whoever becomes the next prime minister could affect the trajectory of future fiscal policy, although a top central bank official pushed back against this.
Fiscal support is going to imply that BoE will have to tighten monetary policy a bit ... aggressively.
A win by Mordaunt could sort of be a game changer for sterling, not so much against the dollar but against other currencies.
