* Graph: World exchange rates for 2019 http://tmsnrt.rs/2egbfVh
* Chart: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Updates with job data, comment)
By Dhara Ranasinghe
LONDON (Reuters) – The pound fell from its six-month highs against the euro and was slightly softer against the dollar on Tuesday, as a boost from the Brexit Party's decision not to contest previously conservative seats in the coming months. British elections faded.
The pound was up 1% against the dollar on Monday after Brexit Party leader Nigel Farage said he did not want anti-Brexit parties to win, so he was leaving candidates in seats won by conservatives in 2017.
While the move was seen as a significant boost for Prime Minister Boris Johnson ahead of the December 12 elections, currency analysts said there was still much wind against the pound.
That reflected a more cautious note in the talks on Tuesday.
"Yesterday's move was too big for what we saw as a limited shift in the outlook for the election," said Adam Cole, director of currency strategy at RBC Capital Markets.
"A conservative majority is a little more likely, but there are still obstacles," he said, referring to the Conservative Party.
At 10:30 GMT, the pound fell 0.15% to $ 1.2832 and flirted with $ 1.29 on Monday. The US currency tightened ahead of an important speech by US President Donald Trump later in this session.
Against the euro, the pound was slightly softer on the day, at around 85.91 cents – down about a third per cent from Monday's peak of 85.62 cents in six months.
If conservatives win the majority, the pound could rise 3%, according to a recent Reuters poll. Now bookmakers say most conservatives are the favorite.
Deutsche Bank strategist Jim Reid said that while the party's news on Brexit is positive for the Conservative Party, it can bring only 10 to 15 additional seats.
"So it's useful for conservatives instead of changing the game," he said in a statement.
Meanwhile, economic data remained the second violin of the upcoming election.
The story goes on
British employers cut more jobs in more than four years between July and September, according to official data highlighting how the labor market is slowing.
The unemployment rate fell to 3.8%, its lowest level since early 1975, during the third quarter, but falling employment, weaker wage growth and job cuts pointed to a weaker outlook.
Currency analysts said a weak economy and expectations of a Bank of England rate cut in the coming months are additional reasons to be wary of the pound.
Two BoE policymakers voted to cut rates last week and others could follow if growth remains weak and uncertainty persists over long-term trade links between Britain and the European Union.
(Report by Dhara Ranasinghe; Editing by Kim Coghill and Andrew Cawthorne)