Sterling slips after UK jobs data, politics in focus

May 19 (Reuters) - Sterling dipped on ​Tuesday ⁠after data showed that Britain's employers reined ​in their hiring and posted fewer job vacancies in April.

The Office for National Statistics said ​the ‌jobs drop was the biggest since May 2020, at the start of the COVID-19 pandemic, ⁠but stressed that the figures were likely ⁠to be revised.

The dollar edged up ​as investors weighed Middle East tentative peace hopes against concerns that the Federal Reserve could hike rates this year.

The pound was last 0.26% lower against a broadly ​stronger dollar at $1.3399, ‌after jumping by 0.83% the day before.

“The main trigger for the reversal higher for the pound were reassuring reports that potential Labour leadership candidate Andy Burnham has ruled out changing the government’s self-imposed fiscal rules,” said Lee Hardman, ​senior currency economist at MUFG.

Greater Manchester Mayor Andy Burnham is seeking a seat in parliament ‌that would allow him to challenge British Prime Minister Keir Starmer, who is under intense pressure from within his ‌Labour Party to quit. Starmer said on Monday his time as leader of the country was not over.

“The relief rebound for the pound has been ​dampened this morning by the release of much weaker-than-expected UK labour market data,” MUFG’s Hardman added.

Data may ‌dampen near-term expectations for Bank of England rate hikes in response to the energy price shock.

The UK rates market, however, still prices in a hike ⁠at the July ⁠Monetary Policy Committee meeting, suggesting investors are placing limited ‌weight on the sharp drop in employment reported on Tuesday.

Analysts also said an early resolution to ​the political turmoil ​in Britain looked unlikely.

Depending on the outcome of the ‌June by-election, a full leadership contest could follow, stretching through July and potentially into August, during which international investors may be inclined to steer clear of UK assets.