The British pound rebounded to hold above recent lows, although it remained vulnerable as traders still worry that Britain is headed for a no-deal Brexit.

Sterling hit a new, almost two-year low against the euro overnight, with the losses largely down to strength in the single currency rather than more Brexit-related worries.

The Guardian newspaper reported late on Monday that Brussels diplomats, briefed after a meeting with British Prime Minister Boris Johnson's chief European envoy, said it was clear Johnson had no intention of renegotiating the withdrawal agreement.

Johnson has said Britain will leave the European Union on October 31st with or without a deal.

Michael Gove, the British minister responsible for planning for a no-deal Brexit, said he was saddened the European Union was refusing to re-open discussions on a divorce deal. 

Britain remained open to renegotiating, he said.

However, markets believe the risk of a no-deal Brexit in October has surged in recent weeks under Johnson, and such fears have hammered the pound to its lowest in more than two years.

On Tuesday, sterling rose 0.3% against the dollar to $1.2175, away from the 31-month low of $1.2080 hit last week.

It had climbed as high as $1.2209 earlier in the session when the dollar sold off.

Against the euro the pound recovered from a nearly 2-year low of 92.49 pence to touch 91.94 pence, up 0.3% on the day.