Sterling rose slightly on Wednesday, supported by hopes that Prime Minister Theresa May can agree a blueprint for Britain’s post-Brexit ties with the European Union.
All EU leaders are due to meet on Sunday to rubber-stamp the deal, consisting of Britain’s withdrawal agreement and an outline of the two sides’ new relationship after Britain exits the EU in March.
German Chancellor Angela Merkel said she believed a solution would be found by Sunday, despite not knowing how to solve Spanish objections.
Brexit negotiations and political uncertainty in Britain remain the dominant drivers for the pound, and many analysts are cautious about its prospects.
“Speculation that May can re-negotiate her withdrawal agreement with Brussels looks misplaced and instead her trip today is all about writing the non-binding political declaration that will accompany the exit,” ING analysts wrote in a client note.
May faces fierce domestic opposition to her Brexit deal, and the arithmetic is against her in a parliamentary vote she needs to win to get the agreement signed off.
Still, rebel moves to force a no-confidence vote in her leadership have fizzled and sterling has pulled away from last week’s lows of $1.2725, its weakest since late October.
On Tuesday the pound rose 0.2 percent to $1.2813, while slipping 0.1 percent against the euro to 89.04 pence.
