Sterling rallied for a second consecutive day on Tuesday as a weaker dollar fuelled appetite for riskier currencies while overnight comments from the European Union's chief negotiator that a Brexit deal was possible within weeks boosted sentiment.
For the second time in less than a week, Michel Barnier has signalled his desire to push ahead with Brexit negotiations, less than seven months before the United Kingdom is slated to leave the European Union on March 29, 2019.
In early London trading, sterling rose 0.4 percent to a five-week high of $1.3072 against the dollar. Against the euro, it was broadly flat at 89.02 pence.
Hedge funds are broadly negative on the outlook for the British currency, according to latest positioning data which shows a net $5.5 billion outstanding short position.
But recent comments from policymakers have prompted investors to reduce some of their short positions.
Source : Reuters