The pound gained ground against its major counterparts in the European session on Tuesday, as a data showed that the UK employment rate hit a record high, indicating that the labor market remained solid despite sluggish economic growth.

Data from the Office for National Statistics showed that the employment rate rose by 0.6 percentage points annually to a record 76.3 percent in three months to November.

The unemployment rate held steady at 3.8 percent, in line with expectations.

The level of unemployment reduced marginally by 7,000 sequentially to 1.31 million. At the same time, employment increased by 208,000 on the quarter to a record high of 32.90 million.

During three months to November, average earnings including bonus increased 3.2 percent, while that excluding bonus advanced 3.4 percent from same period last year.

In December, the claimant count rose marginally to 3.5 percent from 3.4 percent in November. The number of people claiming unemployment benefits increased by 14,900 from the previous month.

The pound showed mixed trading against its major opponents in the Asian session. While it fell against the yen and the franc, it held steady against the euro. Against the greenback, it rose.

The pound appreciated to a 4-day high of 0.8503 versus the euro, reversing from a low of 0.8535 seen at 8:00 pm ET. The pound is seen finding resistance around the 0.83 mark.

Survey results from the ZEW - Leibniz Centre for European Economic Research showed that German economic confidence strengthened to the highest level since 2015.

The economic sentiment index rose more-than-expected to 26.7 in January from 10.7 in December. This was the highest since July 2015, when the score was 29.7. Economists had forecast a reading of 15.0 for January.

The pound rose to a 4-day high of 1.2637 versus the franc, after touching as low as 1.2572 at 3:00 am ET. The next possible resistance for the pound is seen around the 1.28 mark.

The pound spiked up to a 4-day high of 1.3049 versus the dollar from Monday's closing value of 1.3010. If the pound extends rally, 1.32 is possibly seen as its next resistance level.

After declining to 142.86 at 8:45 pm ET, the pound reversed direction to hit a 4-day high of 143.52 against the yen. On the upside, 146.00 is possibly seen as the next resistance for the pound.

The Bank of Japan maintained its monetary policy but upgraded its growth outlook.

The Policy Board of the BoJ voted 7-2 to retain the interest rate at -0.1 percent on current accounts that financial institutions maintain at the central bank.

Looking ahead, Canada manufacturing sales for November are scheduled for release in the New York session.

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