LONDON: Sterling crawled off a seven-year low against the dollar on Wednesday after data showed Britain's unemployment rate unexpectedly dropped to its lowest in a decade.
The pound had fallen to a fresh trough just before the data, extending its 8 percent slide against the greenback over the past two months as investors push back bets on when UK interest rates will start to rise. Concerns over a possible "Brexit" from Europe have also weighed on the currency.
But Wednesday's data provided sterling with some breathing room, even if analysts said it did not change the fundamental picture for Britain. The jobless rate unexpectedly fell to 5.1 percent, its lowest since early 2006, although wage growth was at its slowest in almost a year.
Having earlier fallen to $1.4125, its weakest since March 2009, sterling recovered to trade at $1.4177, leaving it up just 0.1 percent on the day.
Against the euro, the pound pared some of its earlier losses to trade down 0.1 percent on the day at 76.99 pence. It earlier hit a one-year low of 77.56 pence.
"The market is not in the mood for buying sterling, given the continuation of the risk-aversion theme," said Mizuho's head of FX hedge fund sales in London, Neil Jones. Oil prices slid further on Wednesday, dragging stocks down with them.
"However, the jobs data is strong. I would suggest a similar response to yesterday. Some short covering would send the currency higher, but I do not look for any change in the current overall lower trend."
Data showing slightly higher than expected inflation on Tuesday had also given sterling some brief respite from what has been a brutal sell-off.
But those gains were rapidly reversed by a speech from Bank of England Governor Mark Carney, who said that he had no "set timetable" for raising interest rates and that the economy would need to grow faster than average for a move.
He said global and domestic growth had proved weaker than he had expected in the middle of last year, when he predicted that a decision on when to raise interest rates would have come into "sharper relief" by early 2016.
"Yesterday's choppy sterling price action is a sign of things to come over the coming months," wrote ING currency strategist in a note to clients.
"Circulating headwinds in the form of a dovish BoE, risk-off market and Brexit-related uncertainties will likely see the overall theme of sterling weakness remain in place."
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