Sterling was a touch lower against a stronger dollar on Tuesday, but held up against the euro, while currency markets anticipated fresh inflation data from the United States.
European stock markets were in the red and the dollar was a touch higher as traders waited for U.S. inflation data that was expected to reinforce expectations for the Federal Reserve to tighten monetary policy aggressively.
At 1119 GMT, the pound was down 0.1% on the day versus the dollar at $1.30145.
Versus the euro it was up 0.1% at 83.46 pence per euro .
British government bond yields rose, with the 2-year gilt briefly hitting its highest since 2009 - tracking a broader rise in German and U.S. bond yields. The 20-year gilt touched its highest since the day of the Brexit referendum in 2016.
Sterling is overall down against the dollar so far this year, as rising U.S. Treasury yields due to expectations for aggressive Federal Reserve rate hikes have pushed the dollar higher.
Neil Jones, head of FX sales at Mizuho, said the pound's slippage on Tuesday was a function of dollar strength.
"There's a hierarchy of perception of central bank hawkishness in terms of rates," he said.
"The Fed perhaps is leading the pack and the Bank of England is second at least amongst the major currencies and that’s reflected in foreign exchange."
Versus the Japanese yen, the pound has gained 2.2% so far this month, and 3.6% in March.
Britain's jobless rate fell in the three months to February, slipping further below the level it was at before the coronavirus pandemic, data showed.
The Bank of England is watching closely for signs that the lack of candidates to fill jobs will push up wages to the extent that it risks a wage-price spiral. But workers' pay is failing to keep up with accelerating inflation. Pay excluding bonuses saw its biggest drop since 2013.
"For the time being, this kind of data can probably support market expectations of a Bank of England Bank Rate above 2.00% by year-end (versus 0.75% currently)," wrote ING FX strategists in a note to clients.
"We prefer any GBP strength to be played out against the euro and the Japanese yen, while cable still looks vulnerable to 1.2850 in a strong dollar environment."
The pound took a brief hit on Monday from data showing that the British economy slowed more sharply than expected in February.
(Reporting by Elizabeth Howcroft; Editing by Alex Richardson, William Maclean)