Sterling edged higher today after British finance minister Rishi Sunak announced a new job support scheme, but said the government won't save every job.
Against the dollar, sterling was up 0.2% at $1.2751, after hitting a two-month low of $1.2676 yesterday.
Against the euro, sterling was up 0.2% at 91.4 pence.
In a choppy session, the pound remained above $1.27 on the overall picture of more government support to rescue businesses and jobs.
But fears that unemployment will rise when the furlough scheme ends next month kept investors nervous.
As Sunak said the British government will support only viable jobs, "the main question is who is going to determine what is the definition of a viable job," said Naeem Aslam, chief market analyst at AvaTrade.
Investors are also keen for clues as to whether the Bank of England intends to cut interest rates to below zero. Bank of England governor Andrew Bailey is due to speak later today.
Sterling has lost 4.4% against the dollar in September so far, and is on course for its worst month since October 2016, as talks of negative rates, the looming risk of a no-deal Brexit and new lockdown measures weigh down the currency.
Earlier this week, Prime Minister Boris Johnson told British people to work from home where possible and ordered restaurants and bars to close early. The new measures could last for six months, he said.
Sterling gained some support from renewed hope the European Union and Britain can reach a Brexit trade agreement by the end of a transition period in December after two of the most powerful players in the negotiations said they were determined to strike a deal.