Sterling bobbed up and down Wednesday as Brexit-related reports that kept traders guessing about how the situation was developing, dealers said.
In what has already been a topsy-turvy week, the pound was catapulted on Tuesday to the highest levels against the dollar and euro since May, propelled by Brexit deal hopes that subsequently appeared to be fading somewhat.
Following early losses on Wednesday, sterling bounced back and was still trading at elevated levels later in the day.
"The pound is once again finding support, reaching new five-month highs this Wednesday when it touched USD 1.2840, as currency markets move to price in increased chances of a deal being reached between the UK and the EU," said Ricardo Evangelista a senior analyst at ActivTrades.
The European Union's chief Brexit negotiator Michel Barnier nonetheless warned senior officials that "significant issues" remain in the way of efforts to agree a deal with London on the eve of a key summit.
London stocks lapsed into the red in initial trading and remained there in afternoon exchanges.
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Asian and other European stock markets experienced mixed fortunes as traders eyed signs of China-US tensions over Hong Kong.
In the US, stocks were slightly lower in opening trade after data showed that consumers spent less in September, breaking a seven-month increase.
"Fresh uncertainty in relation to Brexit has hit sentiment" in Britain remarked analyst David Madden at CMC Markets UK.
"It was reported the EU said a deal was impossible unless the UK moves, which has dashed hopes for the possibility of an agreement being reached soon.
"Much of the major gains that were made yesterday were driven by the prospect of a deal being achieved, so now some dealers are reversing their positions."