The pound slipped from its highest level in more than four months on Thursday as investors waited for a Bank of England decision on rates later in the day.

Traders were also keeping an eye on UK wage and employment data and U.S. tariff developments and geopolitics.

Sterling was last down 0.2% against the dollar at $1.2975, after earlier rising to $1.3015, its highest since early November.

The pound, along with the euro, has risen sharply against the dollar since January as investors have fretted about the negative impact of U.S. President Donald Trump's stop-start tariffs on the American economy.

Expectations of higher spending on defence in Europe, as well as signs of stickier-than-expected inflation, have also boosted sterling and the euro against the dollar.

The euro was steady against the pound at 83.79 pence on Thursday. It is up around 1.7% in March against sterling, reflecting bets that higher euro zone and German spending on defence and infrastructure will boost growth in the bloc.

Economists and traders expect the Bank of England to hold rates at 4.5% at 1200 GMT, as the institution awaits the impact of Trump's tariffs and an imminent tax hike for employers in Britain. It has gradually lowered interest rates since August last year from a high of 5.25%.

Data on Thursday showed the pace of British pay growth was little changed and there were others signs of stability in the jobs market in January and February.

"The labour market data will likely reinforce the MPC’s caution," said Matt Swannell, chief economic advisor to the EY Item Club economic forecaster, referring to the BoE's Monetary Policy Committee.

"For now, it seems likely the current gradual pace of interest rates cuts will continue until at least the summer, at which point the MPC will likely have more meaningful information to hand on the longer term outlook."

The U.S. dollar ticked up slightly on Thursday but continued to trade around five-month lows, with the index at 103.69, down 3.6% for the month.

The Federal Reserve held interest rates on Wednesday and lowered U.S. growth forecasts.

Also on investors' radars was the Ukraine war, with Trump and Ukrainian President Volodymyr Zelenskiy agreeing on Wednesday that technical teams would meet in Saudi Arabia in the coming days to discuss peace.

(Reporting by Harry Robertson Editing by Peter Graff)