#8220;In the wake of the very strong UK data the fact that sterling has lagged other currencies slightly against the dollar suggests politics is dominating,#8221; said Colin Asher, senior analyst at Mizuho Securities.
Elsewhere, the dollar rallied after official data showed the US economy added less jobs than expected in December, although wages grew at the fastest pace in seven years.
#8220;The non-farm payrolls and jobs report no longer hold the same kind of importance that they have held in previous years as traders look towards other data as the more market moving events,#8221; he said.
#8220;The payroll will always cause some kind of volatility, but with employment stable the small changes in the monthly NFP and unemployment rates become largely inconsequential.#8221;
James Hughes, chief market analyst at GKFX, said the dollar reacted in predictable fashion to the non-farm payrolls (NFP) report, initially spiking higher, before reversing to hit new lows and then retrace back to where it started.
Meanwhile, after declining in November, average hourly earnings rose by 0.4% last month, while hourly pay increased by 2.9% year-on-year, marking the fastest 12-month increase since a recovery that began in mid-2009.
By early afternoon, sterling was trading at 0.09% lower against the euro at €1.1691 (£1.00, $1.23) and was down by 0.68% against the dollar, buying $1.2332. According to a poll, the UK currency could slip even further once the government formally begins the exit process from the European Union at the end of March.