Sterling inches higher after UK jobs figures beat expectations

LONDON, June 18 (Reuters) - The pound rose slightly on Thursday, recovering from a sharp drop to a two-month low the day before, after British employment data came in stronger than expected.

Sterling was last up 0.17% at $1.332, after sliding 1% on Wednesday when U.S. Federal Reserve policymakers signalled they could hike interest rates this year.

The euro was up 0.05% against the pound at 86.54 pence, suggesting much of sterling's rise against the dollar was a bounce from Wednesday's sharp fall.

Economic data on Thursday showed the UK unemployment rate fell to 4.9% in the three months through April, down from 5% previously.

The number of people in payrolled employment rose by 2,000 in May, the data showed, while annual wage growth excluding bonuses remained at 3.4%, stronger than the 3.2% economists predicted.

The growth in pay will be closely watched by the Bank of England, which is widely expected to hold interest rates at 3.75% later on Thursday.

"The fact that wage growth came in a bit stronger today will certainly interest the hawks on the Monetary Policy Committee, but we think it is unlikely the Bank delivers the same kind of hawkish message as the U.S. Fed last night," said Luke Bartholomew, deputy chief economist at Aberdeen.

April's dramatic 100,000 drop in payrolled employees was revised to a still-sharp decline of 53,000.

"On the face of it, the latest UK jobs report doesn't look so bad," said James Smith, developed markets economist at ING.

"But the details still look dovish for the Bank of England. And the report is another reminder that the case for higher rates is far from the clear cut."

(Reporting by Harry Robertson; Editing by Joe Bavier)