Sterling edged down against the dollar on Wednesday, as traders held their breath ahead of British average earnings data, which if robust will reinforce bets on a Bank of England rate hike in May. Market have moved to price in around a 70 percent chance of a rate rise in May following a more hawkish than expected BoE policy statement earlier in the month. But economists say any tightening is contingent on solid wage growth, as well as Britain securing a post-Brexit transition deal.
Labour market data due at 0930 GMT is expected to show earnings growing at 2.5 percent. The pound jumped on Tuesday after a media report that the European Parliament would call for giving Britain "privileged" single market access.
Growing hopes that Britain and the European Union can agree a transition deal, and then terms for the UK that allow it to remain as close as possible to the trading bloc, have helped support sterling this year. But the British currrency was back below $1.40 on Wednesday, trading down 0.2 percent by 0840 at $1.3965.
The pound was flat at 88.20 pence per euro.
"We wouldn't be surprised if investors were genuinely confused over the short-term direction of travel for sterling given the myriad of different narratives and factors driving the currency right now," wrote ING currency strategist Viraj Patel in a note to clients. "Today's eventful UK calendar is only set to ramp up the short-term noise levels. The latest jobs report will be closely watched following the BoE's data and Brexit-contingent hawkish signal."
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