Sterling fell 0.3% to 1.2685 against the U.S. dollar in early London trading on Wednesday after UK labor-market data pointed to slower momentum and increased expectations for Bank of England easing. The unemployment rate rose to 4.3% in the three months to November from 4.2%, payroll employees fell by 47,000 in December for a third straight monthly decline, and average earnings excluding bonuses slowed to 5.6% year on year from 6.0%, below the Bank of England's 5.7% forecast. Markets lifted the implied probability of a February rate cut to 60% from 45% before the data. The move in sterling was reinforced by a firmer U.S. currency, with the dollar index up 0.2% on safe-haven flows and expectations the Federal Reserve will keep rates higher for longer ahead of U.S. inflation data later in the week. Analysts said GBP/USD was testing support around 1.2650, with a break lower potentially exposing 1.2550, though resilient UK services activity and consumer spending may limit the downside. Traders are now focused on upcoming UK GDP figures and the Bank of England's February meeting, with policy divergence between the Bank and the Fed remaining a key driver for the pair.