LONDON, Oct 17 (Reuters) - Sterling rose against the euro and the dollar on Wednesday while gilts pared losses as markets focused on stronger than expected UK average earnings data.

The above forecast jobs report overshadowed minutes from the Bank of England's October meeting which showed that one of the nine policymakers had voted for a rate cut.

Consensus had been for a unanimous vote in favour of leaving rates on hold.

The pound intially fell on the minutes outcome, before reversing the move as focus shifted to the jobs data.

By 0834 GMT, sterling was testing session highs around $2.0369 <GBP=>, up around 20 ticks from levels seen before the data and the minutes.

The euro hit session lows at 69.60 pence <EURGBP=>.

"The labour market (data) was a bit stronger, which benefited the pound," said Jeremy Stretch, currency strategist at Rabobank.

UK gilt futures pared gains and interest rate futures fell, indicating investors' slight shift toward pricing in a more hawkish BoE.

The December gilt futre was last up 10 ticks on the day at 106.36, having traded up 15 ticks just before the data and minutes.

Short sterling contracts fell as much as 3 ticks across the 2007-08 strip, particularly at the back end, from around flat on the day beforehand.

Source supplied by: Reuters