Spanish and Dutch finance ministers have agreed to push for a Brexit deal that keeps Britain as close to the European Union as possible, according to a person familiar with the situation.
"Sterling jumped 1 per cent today to reach its best level since the Brexit vote after a bout of dollar weakness and some good news on Brexit delivered another boost to pound bulls", said Neil Wilson, a senior market analyst at ETX Capital.
Spain's economy ministry also denied the report.
As a result, the pound hit the highest level against the US dollar (GBP/USD) since the Brexit referendum, nearing the 1.37 barrier, while the pound also climbed against other currencies, making notable gains against the Canadian dollar, Australian dollar, New Zealand dollar, and South African rand.
However, despite the recent uptick in USD many analysts remain concerned the currency is still set for further losses, with investors becoming increasingly sensitive to the U.S. dollar, especially in regards to negative factors. Some currency strategists foresee the GBP/USD falling to around $1.33, which would be December's low.
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"The dollar was really down in the dumps this Friday, the currency losing its way in the face of positive political updates from the Eurozone and the United Kingdom, and a disappointing afternoon of USA data", said Connor Campbell of Spreadex.
"Just because two of the 27 members say this, it doesn't mean a softer Brexit will happen".
The study, which was commissioned by London Mayor Sadiq Khan, suggests that should Britain leave the European Union without access to the single market it would lead to a huge fall in jobs and up to £50bn less in investment by 2030.
The pound is now at around $1.3380 against the U.S. dollar, down 0.24 per cent from this morning's starting levels and the first time the pairing has dropped below $1.35 in two weeks.
Some traders are concerned that reported by several retailers this week was further evidence of a consumer slowdown as inflation erodes spending power.