Sterling touched 1.34 against the dollar on Monday, extending gains of more than 1, after Britain and the European Union extended discussions on a postBrexit trade deal beyond Sundays deadline.
British Prime Minister Boris Johnson and Ursula von der Leyen, the president of the European Commission, told negotiators to continue talks beyond Sunday to resolve an impasse on arrangements that would guarantee British access to the EUs single market.
The EUs Brexit negotiator, Michel Barnier, said a new trade pact with Britain was still possible as negotiators sought to break deadlocks on access to UK fishing waters for EU vessels and corporate economic fairplay rules.
British Business Secretary Alok Sharma told Sky News on Monday that while Britain and the EU are still apart in the talks, Johnson does not want to walk away yet.
By 0954 GMT, the pound traded 1.4 higher to the dollar at 1.3405, having hit the days high of 1.3411 earlier.
Against the euro, it was 1 higher at 90.63 pence per euro.
The pound is obviously relieved that the trade talks will continue between the EU and the UK, said Jane Foley, head of FX strategy at Rabobank.
However, no tangible process has been confirmed over the weekend and the market is therefore likely to remain on tenterhooks in the week ahead. Without confirmation that progress has been made, the pounds gains are likely to be capped.
The odds of Britain agreeing a trade deal with the EU before the end of a transition period have risen…