Sterling pulled back from recent highs today as investors booked profits and assessed the continued uncertainty about when the UK will leave the European Union and on what terms.
Sterling has surged to multi-month highs this week after Prime Minister Theresa May said politicians would get the chance to vote on a delay to Brexit if they choose not to back her Brexit withdrawal agreement.
That has encouraged traders to slash their forecasts for a no-deal Brexit and instead expect a delay beyond the official March 29 departure date.
The opposition Labour party leader Jeremy Corbyn said this week it would support a new referendum on Brexit after parliament defeated its alternative plan for leaving the EU.
Sterling touched its highest since September, $1.3351 versus the dollar, yesterday and a 21-month high of 85.295 pence per euro. It is up more than 4% against both currencies so far in 2019.
But today, the British currency slipped 0.2% to $1.3291. Its losses were slightly larger against the euro, bringing sterling 0.3% lower to 85.64 pence.
Investors have rushed to adjust their positions as the risks of a no-deal Brexit look less worrying, pushing sterling higher.
Some investors, however, warn against getting carried away given that uncertainty remains high.
UBS wealth management said they "caution against chasing the rally, as downside risks for the British pound remain in place.