The pound retraced its early gains against its major counterparts in early European deals on Tuesday, despite the release of a data showing better than expected U.K. wage growth in three months to July.

Data from the Office for National Statistics showed that average earnings including bonuses grew 2.6 percent annually and earnings excluding bonuses rose 2.9 percent. Earnings including bonuses were forecast to rise by 2.5 percent and earnings excluding bonuses were seen at 2.8 percent.

The unemployment rate came in at 4 percent in three months to July. This was the lowest rate since February 1975.

The number of unemployed decreased by 55,000 from three months to April to 1.36 million.

At the same time, the employment rate dropped marginally to 75.5 percent in three months to July from 75.6 percent in three months to April.

In August, the claimant count rate rose to 2.6 percent from 2.5 percent in July. The number of people claiming unemployment benefits increased by 8,700 from July.

The currency was higher early in the session following remarks by EU Brexit negotiator Michel Barnier that it was 'realistic' to expect a Brexit deal within six to eight weeks.

"If we are realistic, we are able to reach an agreement on the first stage of the negotiation, which is the Brexit treaty, within six or eight weeks," Barnier said at a conference in the Alpine lake resort of Bled in northwestern Slovenia on Monday.

The pound eased to 144.73 against the yen, from near a 6-week high of 145.92 hit at 3:15 am ET. The next possible support for the pound is seen around the 142.00 level.

Data from the Ministry of Economy, Trade and Industry showed that Japan's tertiary industry activity recovered in July.

The tertiary industry activity index edged up 0.1 percent on month in July, in line with expectations, after declining by revised 0.6 percent in June.

Having advanced to near a 5-week high of 1.2743 against the franc at 2:30 am ET, the pound reversed direction and dropped to 1.2651. If the pound falls further, 1.23 is likely seen as its next support level.

The pound retreated to 1.2989 against the dollar, following an advance to near a 6-week high of 1.3087 at 3:15 am ET. The pound is poised to find support around the 1.29 level.

After rising to near a 6-week high of 0.8888 against the euro at 4:30 am ET, the pound changed course and fell to 0.8938. On the downside, 0.91 is possibly seen as its next support level.

Survey data from the Centre for European Economic Research showed that German economic sentiment improved more-than-expected in September.

The economic sentiment indicator climbed to -10.6 from -13.7 in August. Economist had expected a modest improvement in the index to -13.5.

Looking ahead, at 8:15 am ET, Canada housing starts for August are set for release.

In the New York session, U.S. wholesale inventories for July will be out.

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