Bloomberg report that Spanish and Dutch finance ministers have agreed to work together to push for a Brexit deal that keeps Britain as close to the European Union as possible appears to be the catalyst.
Sterling has jumped to its highest level against the USA dollar since the Brexit vote.
Both countries denied the report but the currency continued to climb.
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 United States dollar, especially in regards to negative factors.
Meanwhile a lull in domestic data may leave the pound a little directionless for the remainder of this week, with GBP investors likely to turn their attention to next week's inflation figures.
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Net long bets on sterling are already near their highest levels in more than three years, according to data released by the U.S. Commodity Futures Trading Commission on Friday.
Mizuho analyst Neil Jones said the Bloomberg report, if true, was less significant than the sterling rally suggested.
Britain is due to exit the European Union on March 29, 2019, but is preparing to discuss the terms of a two-year transition period beyond that date with Barnier, who represents the interests of the other 27 European Union member states in the Brexit negotiations. "I doubt it's as straightforward as that", he said.
"Although the comments came from just two ministers who don't necessarily speak for the Barnier team as such, there is a sense that the direction of travel for the United Kingdom with regards Brexit is a lot more positive than it was prior to December", he added. "We also have positive language around financial services and the prospect of Britain paying for market access".
Sterling rose more than half a percent to hit a four-month high against the dollar on Friday as investors dumped the greenback against a range of peers following strong euro gains but the pound lost ground against the single currency.