Sterling rose on investor hopes that MPs will put some sort of brake on the potential slide toward a no deal Brexit in just over two months.
The UK currency which has been the main barometer for the weight of market bets on concerns and hopes over a hard or soft Brexit climbed against the dollar by almost 1%. Its gains against the euro were less dramatic.
It came as MPs attempted to prevent a no-deal Brexit after the opposition Labour Party said it was likely to throw its parliamentary weight behind that.
British Prime Minister Theresa May is battling to break the deadlock after last week’s crushing defeat of her two-year attempt to forge an orderly divorce raised the prospect of an exit without a deal.
Labour will probably back an attempt, based on an amendment proposed by Labour MP Yvette Cooper that could result in Ms May being given until February 26 to get a deal approved by parliament or face MPs voting on delaying Brexit.
John McDonnell, the second most powerful figure in the party, told the BBC the amendment was sensible and Labour was “highly likely” to back it. At least nine Conservative MPs have also publicly said they will support it, suggesting it has a good chance of passing. Sterling rose to $1.3079 on bets that a no-deal Brexit can be avoided if the UK parliament exerts greater control over the process.
Chris Beauchamp, chief market analyst at online broker IG, said there may be an endgame to the political chaos over Brexit in Westminster but that the risks remained high.
"While a no-deal can never be ruled out, it looks like a cross-party approach to avoid this outcome and then perhaps take over the Brexit process entirely is finally emerging. But with the pound at a two-month high against the euro, a lot hinges on this rosy scenario coming to pass," Mr Beauchamp said.
Many firms on both sides of the Irish Sea are preparing for a hard Brexit outcome. WH Smith has boosted reserves of stationery in the UK in case ports become jammed due to Brexit, joining a host of other consumer-products companies stockpiling to prepare for disruption.
The retailer will hold five to six months worth of stationery rather than the typical level of three to four months as a result of the uncertainty.
“We’re used to holding quite a bit of forward cover in terms of stock anyway, so what we’ve done is topped that up a little bit to put ourselves in an even better position should there be congestion at ports,” chief executive Stephen Clarke said.
And a Cork technology firm said it has come up with a digital way for SMEs and other importers and exporters to meet customs requirements for extra documentation due to Brexit.
Freight Station, which publicly demonstrated its Brexit programme this week, said its software now includes customs documentation that is integrated with Revenue’s customs systems.
Its founders, Kieran Gleeson and Steve Merrick, said exporters can process their customs and transport documentation on the cloud-based platform.
Mr Gleeson said the firm wanted to digitalise all processes, from transport to customs procedures. Many SMEs would have little experience on how to adapt to the new requirements after Brexit, he said.
Additional reporting Reuters