The pound held steady on Tuesday after data showed British wage growth stayed strong in July even as the labour market weakened, painting an unclear picture ahead of the Bank of England's decision next week.

Sterling rose after the data was released but pared its gains and was last flat at $1.2507, after climbing 0.35% on Monday.

British wages excluding bonuses were 7.8% higher than a year earlier in the three months to July, in line with economists' expectations and matching the record pace set in June, figures from the Office for National Statistics showed on Tuesday. Wages including bonuses rose 8.5%, up from 8.4% the previous month.

The strong wage growth came even as the unemployment rate ticked up to 4.3%, from 4.2% in June.

The euro was last trading down 0.17% against the pound at 85.79 pence, little changed from before the data.

Sterling has been one of the best performing currencies this year, up 3.4% since the start of January, but has fallen in recent weeks as cracks have started to show in the UK labour market and the dollar has risen.

The unemployment rate has increased to 4.3% from 3.8% in April and 3.5% in August 2022.

Yet wage growth has remained resilient, putting Bank of England policymakers in a difficult position.

BoE rate-setter Catherine Mann said on Monday that it was too soon for the BoE to stop raising interest rates, and that it was better for the central bank to err on the side of raising them too high.

Pricing in derivatives markets showed that traders see an 82% chance that the BoE raises rates by 25 bps on Thursday next week and an 18% chance they leave them on hold.

The dollar index , which tracks the greenback against six major peers, was last up 0.12% to 104.69 on Tuesday.

It has risen around 5% since mid-July as the U.S. economy has remained strong while other parts of the world have slowed, sending investors towards the safe-haven currency.

Source : Reuters