LONDON: Sterling traded flat against the dollar on Wednesday, barely reacting to data showing Britain's jobless rate had fallen to the lowest level in 11 years, with investors focusing instead on the risks surrounding Brexit.
The latest figures showed Britain's unemployment rate fell in the first three months after the Brexit vote to 4.8 percent, but there were some signs that a slowdown in the labour market could be coming.
Politics have dominated on currency markets in recent months and, with Britain's exit from the European Union still shrouded in uncertainty, sterling has become much more sensitive to developments in that process than to economic data.
It has plunged more than 16 percent since Britons voted to leave the European Union in June, but was flat at $1.2450 on Wednesday after the jobs numbers.
"The unemployment rate was a bit lower, but the earnings data are probably more important and were much as expected so not much to give (sterling) any impetus one way or another really," said RBC Capital Markets currency strategist Adam Cole.
"For now, whilst the domestic politics has gone quiet and the economic data are OK, shorts being covered is probably the more likely scenario for sterling, and it can continue to drift higher on the crosses."
Data from the Commodity Futures Trading Commission released on Friday showed speculators cut their bets on pound weakness for a fifth straight week, after short positions hit a record high.
Against the euro, sterling edged up 0.1 percent to 86 pence . It had fallen as much as 1.3 percent on Tuesday, with losses triggered by a leaked memo suggesting that Britain has no overall plan for leaving the European Union and may take six months to agree one due to divisions in Prime Minister Theresa May's government.
Adding to pressure on the pound was a lower than expected inflation reading, which showed price growth still below half of the Bank of England's 2 percent target.
But sterling later recovered some of its losses as analysts brushed the memo off, after both the prime minister's office and Deloitte - which was responsible for the memo - denied that the report had been commissioned by the government.
Some analysts say the pound should benefit from political risk in Europe over the coming months - including a referendum on constitutional reform in Italy and French and German elections - but not all agree.
"It seems that the recent sterling rebound may be running out of steam," said ING chief EMEA currency strategist Petr Krpata. "Euro/sterling is not an efficient vehicle to position for euro zone political risk, as sterling is no longer the appealing regional relative safe haven it once used to be."
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