LONDON: Sterling rallied on Tuesday (Mar 26) on fresh hope that British Prime Minister Theresa May would avoid a chaotic no-deal Brexit, while global stock markets recovered.
The pound jumped as high as US$1.3262 in London morning deals, before tempering the gains by the afternoon.
The European single currency fell as low as 85.25 pence on hopes of an orderly departure from the European Union on Apr 12.
The long-running saga took a fresh twist after Brexit hardliner Jacob Rees-Mogg declared on Twitter: "The choice seems to be Mrs May's deal or no Brexit".
Rees-Mogg, head of the European Research Group of eurosceptic lawmakers and an MP for May's Conservatives, also said in a political podcast interview that "the PM will not deliver a no-deal Brexit."
Oanda analyst Craig Erlam said it had been clear for months that "May's strategy has been to corner sceptics into backing her deal".
"The idea that the risk of no deal or no Brexit would be enough to win enough votes may be starting to bear fruit just as parliament seeks to wrest control of the process," he told AFP.
"Securing the backing of a high profile ERG member like Rees-Mogg - albeit reluctantly - could dramatically improve May's numbers. It's now just a question of whether it's too little too late."
The remarks came one day after Britain's parliament seized the initiative from May in a historic vote to give MPs a broader say on what happens next.
"Jacob Rees-Mogg appeared to be responsible for the pound perking up," said Spreadex analyst Connor Campbell.
Monday's vote creates parliamentary time for MPs to come up with their own Brexit proposals as Britain tries to stave off a messy divorce in two weeks.
They will now choose whether to revoke Article 50 and cancel Brexit, hold another referendum, vote for a deal including a customs union and single market membership, or leave the EU without a deal.
However, even if they decide a majority course of action, the government is not legally bound to follow their instructions.
The move came after May admitted she still had not secured the votes needed to get her Brexit deal through parliament.
Meanwhile global stocks rebounded after the previous day's losses in many markets, though dealers trod cautiously, still reeling from Monday's pummelling which came on the back of a drop in benchmark 10-year Treasury bond yields below those for three-month bills for the first time since before the global financial crisis.
This so-called inverted yield curve shows investors are more willing to buy long-term debt - usually viewed as a higher risk - as they consider the short-term outlook more hazardous. Such a scenario has preceded several recessions in recent decades.
Paris stocks outperformed their peers after the French government reported its lowest budget deficit as a percentage of GDP in 12 years, and the Insee national statistics office upped its foreast for French growth.
London, meanwhile, was held back by sterling's strength which tends to penalise multinationals generating much of their earnings in foreign currencies.
Key figures around 1645 GMT:
Pound/dollar: UP at US$1.3217 from US$1.3195 at 2100 GMT on Monday
Euro/pound: DOWN at 85.39 pence from 85.75 pence
Euro/dollar: DOWN at US$1.1288 at US$1.1312
Dollar/yen: UP at 110.46 yen from 109.97 yen
London - FTSE 100: UP 0.3 per cent at 7,196.29 points (close)
Frankfurt - DAX 30: UP 0.6 per cent at 11,419.48 (close)
Paris - CAC 40: UP 0.9 per cent at 5,307.38 (close)
EURO STOXX 50: UP 0.6 per cent at 3,319.53
New York - DOW: UP 0.4 per cent at 25,609.99
Tokyo - Nikkei 225: UP 2.2 per cent at 21,428.39 (close)
Hong Kong - Hang Seng: UP 0.2 per cent at 28,566.91 (close)
Shanghai - Composite: DOWN 1.5 per cent at 2,997.10 (close)
Oil - Brent Crude: UP 60 cents at US$67.41 per barrel
Oil - West Texas Intermediate: UP US$1.08 at US$59.90 per barrel