The Pound inched higher on Tuesday, recovering some ground especially against the Euro, as recent market volatility began to ease.

On the macro side, new data revealed signs of a softening UK labour market ahead of this month’s employer tax hike.

That said, robust wage growth continues to pose a challenge for the Bank of England. Markets currently price in a 90% chance of a 25-basis-point rate cut at the BoE’s early May meeting, with two more cuts expected later this year, Reuters news agency reports.

While the UK is less directly affected by US President Donald Trump’s unpredictable tariff moves compared to China or the EU, the escalating risk of a global recession from a full-blown trade war is weighing heavily on investor confidence across the board.

Sterling edged 0.2% higher against the Dollar to $1.1322 at the time of writing, and also strengthened versus the Euro, which slipped 0.24% to 85.87 pence.

Analysts suggest that, despite signs of labour market cooling, the data is unlikely to shift the Bank of England’s trajectory, with expectations still firmly set on quarterly rate cuts moving forward.

“Rising real wages and the subsequent increase in purchasing power will likely favour additional caution from the BoE going forward. However, there is nothing in the report to suggest the BoE will not continue to cut rates gradually,” according to a note by BBVA strategists.

The Pound has climbed nearly 6% against the greenback so far this year, yet it’s down almost 4% versus the Euro. The single currency’s nearly 10% surge reflects a broader investor shift away from US assets, stocks, bonds, and the Dollar, in favour of European markets.

“Euro/Sterling is toying with 86.00 after reaching the highest levels since November 2023 on Friday at c.87.83. Given the absence of negative surprises in today’s macro data, we would expect additional profit-taking in the session ahead,” BBVA added.