Sterling edged up on Tuesday as data revealed the UK’s unemployment rate unexpectedly declined in June, although there was a deceleration in wage growth.

Data revealed that the UK's unemployment rate fell to 4.2% in June, down from 4.4% in May, contrary to forecasts of a slight increase.

At the time of writing, the Pound rose by 0.22%, reaching $1.2794, up from $1.2779 before the data release, as investors concentrated on the robust labour market and its possible implications for Bank of England policy. 

Whereas the Euro declined by 0.33% against the Pound, reaching 85.34 pence, close to a one-week low, Reuters news agency reports.

However, several economists warned that the UK's labour force survey data has become less reliable in recent years due to low survey response rates. 

Furthermore, the labour market data also revealed a decline in job vacancies, while the annual growth in average weekly earnings, excluding bonuses, slowed to 5.4% in the three months through June, down from 5.8% in May, marking the lowest rate since August 2022.

“It is difficult to know how much weight we should place on these (unemployment) figures,” according to Ruth Gregory, deputy chief UK economist at consultancy Capital Economics.

“We doubt today's release will move the needle too much for the Bank of England. We still think the Bank will pause in September before pressing ahead with two more 25 basis point rate cuts in November and December,” she went on to add.

Sterling has dropped by approximately 2% since reaching a one-year high in July, a decline that was influenced by a 25-basis point rate cut by the Bank of England in early August.

July inflation data, set to be released on Wednesday, is forecast to show a slight increase in price growth to 2.3%, up from 2% in June.