Sterling fell against the euro, although not by much, and most analysts say they now expect Britain and the European Union to meet the transition deadline and soon conclude a Brexit deal.
Versus the U.S. dollar, the pound was in neutral territory.
British Prime Minister Boris Johnson and the head of the EU’s executive, Ursula von der Leyen, agreed in a phone call on Saturday to step up Brexit talks to close “significant gaps” barring a new trade partnership.
Both sides said they have made some progress but not yielded a breakthrough.
Johnson does not want the Brexit transition to end without a new trade deal in place, he said on Sunday, but he believes Britain could live with such an outcome.
Goldman Sachs saw the pound strengthening to 87 pence against the euro and said “investors with a stronger conviction that risk conditions will improve into year-end should consider expressing the view in cable (sterling/dollar) to also benefit from likely dollar depreciation.
Britain is battling with rising cases of the new coronavirus infections. On Sunday, it recorded a record 22,961 cases, but that was caused by a glitch in the system, which has since been fixed.
The government launched a programme on Monday aimed at helping those left jobless by the COVID-19 pandemic to get back into work.
Key economic data this week will be the gross domestic product on Friday. Before that are construction PMI on Tuesday and industrial production.