Sterling jumped to a 2-month high against the euro after strong employment data suggested Britain's labour market remained robust despite an economic slowdown ahead of Brexit.
The pound slumped 7% in 2018 on Brexit concerns but it has started the year on the front foot with some investors viewing medium-term sterling valuations as decently priced.
The British currency rose half a percent today and neared $1.30 after data showed British workers' pay grew at the fastest pace in over 10 years.
The figures encouraged traders, who believe that a disorderly no-deal Brexit can be avoided, to buy the pound.
"The market is recognising that parliament will not allow the UK to leave Europe without a deal. Today's data will bolster the chances of a Bank of England interest rate hike as soon as May," said Kallum Pickering, an economist at Berenberg.
But with little time left until Britain leaves the EU on March 29, there is no agreement in London on how it should exit the world's biggest trading bloc. The chance of a "no-deal" exit with no provision to soften the economic shock persists.
"The earnings figures have been somewhat overshadowed by continued Brexit chaos. Investors are focused on how Theresa May will negotiate with the EU over the next few days," said Tyler Griffin, a currency specialist at OFX.
Sterling firmed on Monday after British Prime Minister Theresa May sought to break a parliamentary deadlock over Brexit by proposing to seek further concessions from the European Union.
At 1630 GMT, sterling was up half percent at $1.2957. The British currency has traded within a tight range of $1.28-$1.30 for most of January.
Against the euro, the pound traded up 0.6 percent at 87.61 pence, its highest since November.