Sterling strengthened against the dollar and the euro on Wednesday on investor relief that British Prime Minister Keir Starmer's ​position looked more ⁠secure than it did earlier in the week.

The pound rose 0.5% ‌against the dollar to $1.3708, and while much of that was a result of the dollar being ​weaker across the board ahead of what could be soft U.S. jobs data, the British currency ​also firmed ​against the euro.

The common currency dropped 0.26% to 86.97 pence and was down from as high as 87.41 pence on Monday, when Starmer's position ⁠looked under serious threat.

Starmer pledged on Tuesday to never walk away from his job to change Britain, brushing off a challenge to his authority by the Labour leader in Scotland and other figures in the party who have called on ​him to quit.

Investors ‌are also ⁠assessing the Bank ⁠of England's decision to keep rates on hold last week, in an unexpectedly narrow vote, which ​caused traders to raise their bets on a rate ‌cut in March.

The euro fell as low ⁠as 86.13 pence last week before the BoE decision.

"The bulk of the move higher in euro/sterling is justified by dovish Bank of England reinforcing our view that they'll be more active in cutting rates this year," said Lee Hardman, senior currency analyst at MUFG.

"And then the renewed political uncertainty is never helpful for the pound, though it looks for now that Starmer's position as PM is on more secure ground at least until the (May) local elections."

"If he is removed, ‌the knee-jerk reaction is to sell the pound and gilts (British ⁠government bonds)".

Once traders have got through the U.S. ​payrolls data, due later in the day, the focus will be on Thursday's British GDP data for both January and the fourth quarter of 2025.

Stronger data could cause ​markets to reassess ‌bets on a March BoE rate cut. Traders currently see ⁠around 60% chance of a 25 ​basis point cut.

(Reporting by Alun John; Editing by Anil D'Silva)