Sterling held near a one-month high on Friday as hopes of a breakthrough on Brexit this week prompted some traders to cut back on aggressive short bets on the British currency.
In early London trading, sterling edged higher to $1.3013, close to Thursday's $1.3043, the highest since Aug. 3.
The European Union was ready to offer Britain an unprecedentedly close relationship after it leaves, the EU negotiator, Michel Barnier, said on Wednesday. British Brexit minister Dominic Raab is due to meet Barnier in Brussels on Friday in an attempt to speed up their talks.
Against the euro, the British currency slipped to 89.71 pence, well below the 2018 high of 86.2 pence hit in April.
Despite Brexit talks hopes, investors were wary of buying the currency aggressively as underlying economic weaknesses remained.