By Harry Robertson
LONDON (Reuters) - The British pound traded just below a seven-month high touched last week on Monday as investors digested recruitment data and looked ahead to Tuesday's wage and employment figures.
Sterling was last down 0.1% at $1.2841 after jumping 1.6% last week as investors bet that the Bank of England will be slower than the European Central Bank and U.S. Federal Reserve in cutting interest rates.
The euro was up 0.1% at 85.15 pence, reversing some of last week's 0.6% drop.
The minor dip in the pound came after data showed Britain's labour market slowed sharply in February as recruitment firms reported the biggest drop in demand for staff from employers since the coronavirus lockdown of early 2021.
Investors now turn their attention to Tuesday's figures, where the focus will be on the pace of average earnings growth. It is expected to have remained high at 6.2%, excluding bonuses, in the three months to the end of January, unchanged from December.
"The pound continued to hold on to recent gains, having been buoyed by diverging interest rate cut expectations," said Nikesh Sawjani, UK economist at Lloyds (LON:LLOY), in a research note.
"A key focus will be the weekly earnings growth data which remain above levels consistent with the Bank of England’s 2% inflation target. Headline pay growth has moderated in recent months... but policymakers will be looking for more progress."
Investors will also pay close attention to the U.S. consumer price index inflation data, due in the UK afternoon on Tuesday.
{{2126|The dodollar index was flat on Monday at 102.68 after dropping 1.1% last week on the back of weaker-than-expected labour market data, which boosted the pound and other currencies.
Money market pricing on Monday showed that traders think the first BoE rate cut will most likely come in August, whereas they think the ECB and Fed will probably cut in June.