Sterling hit a 5-week high against the dollar on Tuesday, tracking a broadly weaker US currency, which fell as investors largely discounted an expected Federal Reserve interest rate rise later in the day.
The pound was also supported by data showing Britain's goods trade deficit with the rest of the world narrowed sharply in June.
"It certainly did help to see some narrowing of the trade deficit - but the real positive for sterling will be a 'steady as she goes' message from the Fed and then the next step will be to see what the inflation report tomorrow has to offer," David Mann, foreign exchange strategist at Standard Chartered, said.
The Office for National Statistics said the trade gap narrowed to 4.277 billion pounds from 4.981 billion in May and well below expectations for a gap of 4.9 billion pounds. By 1435 GMT, sterling was at $1.7832, steady on the day, having earlier hit a peak of $1.7917 - last seen at the end of June.
Against the euro, the pound stood at 69.18 pence, steady on the day.
The US central bank is widely expected to deliver its 10th straight 25 basis point increase later on Tuesday, taking its overnight funds rate to 3.5 percent.
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