Sterling steadied above $1.29 today, gaining back some initial losses in London trade after the PMI index of sentiment among manufacturers came in well above forecasts.
The pound had lost around up to a third of a percent in early deals before recovering to trade briefly in positive territory after the survey's publication.
Against the euro it was less than 0.1% weaker at 92.12 pence.
The survey showed UK factories grew a lot more strongly than expected in August as work flowed in from home and abroad, suggesting the economy might be picking up speed after a slow first half of 2017.
That comes, however, after growing nerves around the Brexit process helped drive the pound's biggest monthly fall in trade-weighted terms since last October.
Chief EU negotiator Michel Barnier said yesterday after four days of talks that Britain's withdrawal negotiations with the European Union had failed to make the kind of progress needed to move into a new phase in October.
That leaves businesses and financial markets still faced with the risk of a "cliff-edge" fall into complex World Trade Organisation tariffs and procedures in March 2019.
The UK has raised the prospect of a transition period to smooth out the country's departure from the trade bloc, but the EU says it will not discuss future arrangements until more progress has been made a number of initial issues.
Analysts said that until the cliff-edge Brexit risk associated with March 2019 is removed, the pound will not be in a position to advance notably.