The pound rose on Monday but its modest gains reflected concern among investors about the currency's prospects ahead of a widely anticipated Bank of England interest rake hike this week.
The Bank of England (BoE) looks set to pass a post-financial crisis milestone on Thursday by finally raising interest rates above their emergency levels set more than nine years ago.
In normal circumstances, monetary tightening might strengthen the pound significantly, but with a potentially messy Brexit nearing, the BoE may sound cautious about the pace of further moves away from it stimulus programme, analysts said.
Sterling has fallen for three consecutive weeks against the dollar. That is despite markets pricing in an 86 percent chance of a 25 basis point increase at Thursday’s policy meeting.
The pound on Monday rose to as high as $1.3139 and at 08:15 GMT was up 0.2 percent. Against the euro, it traded broadly flat at 88.88 pence.
With just over eight months left until Britain is due to leave the European Union, there is little clarity about how trade will flow, as Prime Minister Theresa May tries to strike a deal with the bloc.