Sterling rose half a percent to trade above $1.32 on Wednesday after European Union Brexit negotiator Michel Barnier signalled progress on a deal with the UK over its withdrawal from the bloc, as well as on the crucial Irish border question.
Barnier said 80-85 percent of the withdrawal deal was agreed.
He also said the European Union wants to carry out Irish border checks after Brexit “in the least intrusive way possible”. The Irish border has been a key sticking point in Brexit talks.
The pound hit $1.3206, a fresh 3-1/2 month high and strengthened 0.2 percent versus the euro to trade at 87.31 pence.