Sterling rose against a weaker dollar on Thursday on hopes of a Brexit deal, but concern among investors about the Ireland border issue kept gains in check.
Hopes are building that a trade deal between the European Union and Britain can be struck before an EU summit on Oct. 18.
The pound has risen for three consecutive days and was buoyed by comments yesterday from the EU’s Brexit negotiator Michel Barnier suggesting a deal next week was imminent.
Though investors believe that 80 percent of the work on the Brexit deal framework may be over, it is the last 20 percent that is the most difficult.
The EU’s Barnier says Britain must accept possible checks on goods moving between its main island and its province of Northern Ireland.
But the Northern Irish party that British Prime Minister Theresa May’s government relies on for support has threatened to challenge her leadership if their wishes aren’t respected on the Irish border.
Analysts believe that if a no-deal exit from the bloc was avoided the pound could strengthen another 5 to 10 percent in the coming months.
May will brief her cabinet on the progress of Brexit negotiations next Tuesday before she heads to Brussels for the EU summit.