Sterling rose to above $1.30 today reaching a 10-week high as fears of a no-deal Brexit eased.
The pound also rose against the Euro to its highest level in a month, rising to near €1.15.
Sterling’s rise was helped by hopes that the Labour Party would move to prevent a no-deal Brexit.
Labour MP Yvette Cooper tabled an amendment that would force ministers to extend Article 50 if a no-deal Brexit looked likely.
Shadow chancellor John McDonnell expressed tacit approval for the amendment, suggesting the Labour leadership team may back it.
“Yvette Cooper has put an amendment down, which I think is sensible … so I think it’s increasingly likely already that we’ll have to take that option because the government has run the clock down," he told the BBC.
Lukman Otunuga, a research analyst at FXTM, said: “Growing speculation over the government extending article 50 to avoid a nightmare no-deal outcome is likely to continue supporting sterling in the near term.”
Andy Scott, associate director at financial risk management consultancy JCRA, said: “If the worst case scenario is no longer in play, Sterling looks slightly less risky and the outcome of Brexit begins to looks a little less ominous. Yesterday’s very strong employment data was also a factor, with faster wage growth a catalyst for the Bank of England to raise interest rates. Sterling has strengthened by four per cent versus the euro in the past two weeks, its best performance in over a year.
“While the market is suggesting Brexit risks have reduced, we would highlight that all of this optimism could be wiped out if the amendment isn’t passed in next week’s vote. Equally, if there were to be a general election as a result of a no confidence vote being passed, which Jeremy Corbyn continues to push for. This arguably would cause sterling to slide aggressively due to the risk of a Labour government, as well as potentially beginning Brexit negotiations from scratch.”