Sterling fell slightly today after a UK government source poured cold water on the prospect of an imminent Brexit deal, causing the pound to shed earlier gains.
Hopes that Prime Minister Theresa May can secure some changes to her Brexit withdrawal deal from Brussels, and then get the tweaked agreement through the British parliament, have buoyed the pound in recent sessions.
However, the government source said it did not feel like Britain will have secured the changes it needs to its exit deal with the European Union by next week.
May will hold bilateral meetings with EU leaders at the weekend but the source said she was not expected to return with a "piece of paper" on a revised deal.
The pound was down 0.1% at $1.3035 this afternoon.
The resignation of several politicians - angry at their leaders' handling of Brexit - from the ruling Conservative and the opposition Labour parties to sit as independents has encouraged some traders to believe that May will show more flexibility in getting a deal and avoiding a no-deal disorderly Brexit in March.
Sterling had earlier risen 0.3% to a day's high at $1.3086 after British finance minister Philip Hammond said that talks with Brussels had been constructive and that lawmakers could vote on a revised deal as early as next week.
One-week sterling implied volatility - a measure of expected price swings in the pound - has risen, as traders get nervous about a possible parliamentary vote on the deal that is scheduled for February 27.
Against the euro, sterling also initially gained, rising 0.2% to 86.69 pence, before losing ground to trade down slightly at 87.04.