Sterling rose in European trade against a basket of major rivals, resuming gains against euro after a hiatus and almost hitting ten-month highs after strong UK labor data.
Such data bolstered the case for extended policy tightening by Bank of England for a longer duration, in turn underpinning the pound.
On the other hand, some analysts believe the European Central Bank might snap the current cycle of policy tightening following this meeting.
EUR/GBP fell 0.15% to 0.8584, with a session-high at 0.8612, after losing 0.7% yesterday, the first loss in five days on profit-taking off ten-month highs at 0.8536.
UK Labor Data
Recent data showed UK unemployment fell unexpectedly in April while jobless claims fell as well, as average wages grew past estimates.
Such data proved the flexibility of the UK economy, with Bank of England destined to raise interest rates by 25 basis points at the June meeting, with another likely 0.25% rate hike in August.
European Central Bank
The ECB will issue its policy decision this week, expected to raise interest rates by another 0.25%.