Sterling rallied today on speculation that British Prime Minister Theresa May might be closer to securing approval for her Brexit deal after the European Commission agreed to some changes to it ahead of a vote in the British parliament.
The pound jumped as high as $1.3290 as May won legally binding Brexit assurances from the European Union, in a last ditch attempt to sway rebellious British politicans who have threatened to vote down her divorce deal.
After paring some of its earlier gains, sterling was last trading 0.5% higher on the day at $1.3214. It was still up 2.1% from a low of $1.2945 at one stage yesterday.
The euro slipped to its lowest on the pound since May 2017 at 84.71 pence, before recovering the losses somewhat. It was last quoted down one-third of a percent at 85.19 pence.
But the euro, which has struggled recently in line with a sputtering euro zone economy, found a measure of support on the improved sentiment and the Brexit news.
The single currency was last up 0.1% at $1.1259, extending recent gains to a third session.
Analysts said the likelihood remained low that UK MPs would now agree to May's deal in a vote expected later today, just over two weeks before Britain's scheduled March 29 departure from the European Union.
If May loses the vote on her Brexit deal today, she has said lawmakers will get a vote tomorrow on whether to leave the EU without a deal and, if they reject that, then a vote on whether to ask for a limited delay to Brexit.
At a joint news conference with EU Commission head Jean-Claude Juncker last night, May announced three documents aimed at addressing the most contentious part of the exit deal she agreed in November – the Irish backstop.