Sterling rose on Tuesday after strong employment data suggested Britain's labour market remained robust despite an economic slowdown ahead of Brexit.
The pound jumped 0.3 percent to the day's high against the dollar and the euro after data showed British workers’ pay growth hit a 10-year high.
But the currency's gains could be fleeting, analysts said, since the chances of a Bank of England interest rate rise were unlikely to rise on the data due to the risk of a no-deal Brexit.
Sterling firmed on Monday after British Prime Minister Theresa May sought to break a parliamentary deadlock over Brexit by proposing to seek further concessions from the European Union.
Despite the uncertainty, some sterling traders see brighter times ahead for the currency based on growing market confidence that a “no deal” scenario will be avoided.
At 10:30 GMT, sterling was up 0.2 percent at $1.2916. The British currency has traded within a tight range of $1.28-$1.30 for most of January.
Against the euro, the pound traded up 0.3 percent at 87.97 pence.