Sterling extended its gains on Tuesday after the British cabinet office minister said a Brexit agreement was possible in the next 24 or 48 hours, lifting hopes of a breakthrough in talks.
Sterling jumped as high as $1.2929 from around $1.2870 before Lidington’s comments, up more than half a percent on the day.
The pound rose 0.3 percent versus the euro to 87.04 pence.
The British currency had tumbled on Monday on fears negotiations with Brussels on the terms of the UK’s exit from the European Union were deadlocked less than five months before Britain’s official departure date of March 29, 2019.
Prime Minister Theresa May said on Monday talks were nearing their endgame but considerable issues remained unresolved.