Sterling hovered just off seven-week highs against the dollar today as markets seized on another warning from prime minister Theresa May that politicians' failure to approve her Brexit deal could lead to the UK staying in the European Union.
May's EU divorce deal looks almost certain to get the thumbs down from parliament in a vote tomorrow even as she makes last-ditch efforts to garner lawmakers' support for it.
She said in a speech that blocking Brexit was now a more likely outcome than Britain leaving the European Union without a deal.
While she was invoking a line she has deployed in the past to persuade Conservative party politicians to back her deal, it reinforced markets' hopes that Brexit could be softened or even reversed.
The pound last week posted its fourth week in the black in a row, rising sharply on Friday on suggestions that Britain could seek to delay its scheduled March 29 date to exit the European Union.
But it has also benefited from recent dollar weakness and last week from a fall in the euro.
It rallied today to a high of $1.2879, up 0.3% on the day.
Against the euro it firmed 0.2%to stand at 89.06 pence at one stage today - the highest since December 5 - before easing back to trade flat on the day.
The outlook for the currency remains uncertain - a last-minute Brexit deal, a disorderly or no-deal exit, a new referendum or remaining in the bloc are all seen as possible.
Each could have radically different consequences for the sterling outlook.
But markets are increasingly preferring to focus on signs that a "hard" Brexit - crashing out of the bloc without a withdrawal deal in place - is unlikely, given parliament's growing influence on the process.
Instead many have started to price the possibility of another referendum being called which could result in the UK remaining in the EU, a so-called people's vote.
