Sterling rose in tandem with the euro against the dollar on Monday before British Finance Minister Gordon Brown's pre-budget report. "It does seem to be dollar weakness rather than sterling strength," said Neil Parker, market strategist at Royal Bank of Scotland Financial Markets.
He cited a combination of factors, including "some pull from the euro" and a seasonal trend that sterling tends to rise against the dollar in December.
By 1454 GMT sterling was up a third of a percent against the greenback at $1.7390. Against the euro, the pound was little changed at 67.62 pence.
"The dollar is under pressure across the board," said Steven Pearson, head of currency strategy at HBOS Treasury Services, citing order flows and short-covering to explain euro gains. "Euro/sterling has barely moved on the day; it's mostly euro/dollar."
Brown is expected to slash his economic growth forecasts for this year when he delivers his ninth annual pre-budget report to parliament at 1530 GMT.