U.K.’s sterling erased some of its recent gains versus most major currencies in early trading on Wednesday as concerns about Ireland’s sovereign debt overshadowed the nation’s better-than-expected jobless claims report for October.

British jobless claims unexpectedly dropped in October, while the number of employed people in the three months to September rose sharply, suggesting that the labor market conditions are improving.

The number of people claiming job seeker’s allowance, or the claimant count, fell by 3,700 between September and October 2010 to reach 1.47 million, the Office for National Statistics said.

Economists had forecast an increase of 6,000 following September’s revised 1,300 rise. The claimant count rate continued to stay at 4.5% for a fifth straight month.

The total number of unemployed people fell by 9,000 to 2.45 million in the three months to September. During the same period, the broad ILO jobless rate was 7.7%. The number of unemployed males dropped 40,000 to 1.43 million but the number of unemployed women increased by 31,000 to 1.02 million, the highest figure since 1988.

Meanwhile, the nine-member policy board of the Bank of England split three ways for a second month in November to maintain the key interest rate and the size of quantitative easing, the minutes of the meeting showed today.

Seven members of the Monetary Policy Committee including Governor Mervyn King voted to maintain the Bank Rate at 0.5% and the size of quantitative easing at GBP 200 billion. As in the October meeting, Adam Posen and Andrew Sentance voted against the proposition.

In the equity front, the FTSE 100 opened at 5,682 and witnessed some volatile trading that saw the index move back and forth across the unchanged line. The index is currently losing 0.05%.

The pound that climbed to a 2-day high of 1.5869 against the Swiss franc by 4:30 am ET retraced back to near the 1.58 level around 6:45 am. The pound-franc pair is presently worth 1.5825 with 1.5790 seen as the next likely support and 1.5870 as resistance in near-term.

The pound also declined to as low as 1.5875 against the US dollar before showing choppy around 6:20 am ET, down from a session’s high of 1.5939. The pound may find downside and upside target levels at 1.5860 and 1.6020, respectively.

The UK currency declined after hitting a session’s high of 133.02 against the yen around 4:30 am ET. The pound-yen pair is presently quoted at 132.62. If the pound weakens further, 132.30 is seen as the next likely target level.

Japan’s leading index fell to a revised 98.6 in September from 99.5 in August, a final report from the Cabinet Office showed today. The coincident index came in at 102.1, down from 103.3 in the previous month.

The pound that reached as high as 0.8477 against the euro around 4:35 am ET lacked a clear direction thereafter. The euro-pound pair traded in a range between 0.8505 and 0.8480 and the pair is presently quoted at 0.8486.

The eurozone construction output dropped a seasonally adjusted 2.1% on a monthly basis in September, following a 0.4% fall in August, Eurostat said today. Output had decreased 3.5% in July.

Market participants are now looking for fresh clues in the New York session, in which the U.S. CPI, housing starts and building permits – all for the month of October are due out.

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