The pound rose after the Chancellor of the Exchequer said on Monday the European Union was willing to do a Brexit deal, but investors said uncertainty surrounding the ruling Conservative Party conference could quickly reverse the currency's fortunes.
At her party's annual conference this week, Prime Minister Theresa May will defend her plan for leaving the EU where critics like ex-foreign secretary Boris Johnson could openly defy her.
Six months before Britain is due to leave the EU, currency traders are focused on events like the conference and an upcoming EU summit for signs of whether the UK will clinch a deal.
The pound edged up 0.2 percent versus the dollar to $1.3050 and to 88.82 pence against the euro.
Sterling came under pressure last week as optimism for a Brexit trade deal faded and the dollar surged.