Sterling bounced back from early lows in volatile trading on Wednesday after Brexit-supporting members of parliament in British Prime Minister Theresa May's party publicly pledged support for her to stay in power.
The pound had fallen as much as a quarter of a percent to below $1.30 against the dollar after the BBC reported a group of MPs in May's ruling Conservative Party had met to discuss how and when they could force her out of her job.
But it later rose as MPs within her party said they wanted May to stay in power despite disagreeing with her Brexit proposals. Rebellious Conservative MPs have condemned May’s plans for Britain to remain in a free trade zone for goods with the EU after it leaves the bloc.
The Bank of England meets on Thursday for its monetary policy meeting, at which it is expected to keep rates on hold.
Analysts said Brexit would dominate sterling trading.
In choppy trading in recent days, sterling had hit five-week highs of $1.3087 on renewed hopes of a speedy Brexit deal with Brussels.
The pound has lurched up and down on almost every Brexit-related headline in the past week, as traders struggle to decipher whether Britain can avoid a no-deal Brexit when it leaves the EU.