The pound rose to a six-day high on Friday after a Bank of England meeting revived expectations of a rate hike this year, but sterling's gains were checked by fears of a breakdown in Brexit talks next week.
Sterling has struggled through much of June, weighed down by worries about a slowdown in the economy and fraught attempts by British diplomats to secure a deal to exit the European Union in March.
The currency rallied on Thursday, though, when the Bank of England's chief economist unexpectedly voted for an interest rate hike.
The upbeat outlook for interest rates and a weaker dollar on Friday helped sterling climb half a percent to a six-day high of $1.3312, though the currency is still down 7.5 percent from a post-Brexit high hit in April.
Markets now see a 50 percent likelihood of the BoE raising interest rates in August by 25 basis points and a 90 percent chance of a rate hike happening by the end of 2018.