Sterling edged lower against the dollar today, with British Prime Minister Boris Johnson expected to announce new restrictions as the Covid-19 outbreak accelerates, but hopes for a Brexit deal kept the currency above the key $1.30 level.
Boris Johnson was due to hold a meeting of the government's emergency COBRA committee and then address parliament.
His three-tiered local lockdowns will include shutting bars, gyms, casinos and bookmakers in some areas placed onto the "very high" alert level, probably across the north of England, UK media reported.
New lockdowns will add pressure to the UK economy, which grew at the slowest pace in August since it began to recover in May from its record slump, but analysts said markets have turned more optimistic about Brexit negotiations.
Sterling was down 0.2% at $1.3021 today, not far from the one-month high it touched on Friday. Against the euro, it was flat at 90.69 pence.
Boris Johnson had set a deadline of the October 15 EU summit for agreeing a trade deal.
An EU diplomat said on Friday that EU chief Brexit negotiator Michel Barnier wanted a few more concessions from Britain before entering the last intense phase of negotiations.
The Financial Times reported that EU leaders would insist on tough enforcement rules for any trade deal with Britain.
Meanwhile, the Bank of England asked banks today how ready they are for zero or negative interest rates, following up its announcement last month that it was considering how to take rates below zero if necessary.