The pound rose on Tuesday after data showed Britain's unemployment rate unexpectedly fell in June, although wage growth slowed.

Figures showed the UK jobless rate dropped to 4.2% in June, down from 4.4% in May - defying expectations for a small rise.

Sterling was last up 0.22% at $1.2794, from $1.2779 before the data, as investors focused on the strength of the labour market and its potential impact on Bank of England policy.

The euro was down 0.33% against the pound at 85.34 pence, around a one-week low.

However, many economists cautioned that low survey response rates have in recent years made the UK's labour force survey data unreliable.

The labour market data also showed that job vacancies fell while annual growth in average weekly earnings excluding bonuses slowed to 5.4% in the three months through June, the lowest since August 2022, from 5.8% in May.

"It is difficult to know how much weight we should place on these (unemployment) figures," said Ruth Gregory, deputy chief UK economist at consultancy Capital Economics.

"We doubt today's release will move the needle too much for the Bank of England," she said. "We still think the Bank will pause in September before pressing ahead with two more 25 basis point rate cuts in November and December."

The pound has fallen around 2% since hitting a one-year high in July, helped on by a 25 basis point Bank of England rate cut in early August.

July inflation data is due on Wednesday and is expected to show a tick up in price growth to 2.3%, from 2% in June.

(Reporting by Harry Robertson, editing by Alun John and Angus MacSwan)