Sterling stepped back from an earlier one-month high against the dollar on Monday as the greenback rose across the board, but sentiment was underpinned by expectations for inflows related to corporate take-over news.
German firm Linde has agreed to buy Britain's BOC Group for 8.2 billion pounds in cash, while Vodafone Group is in talks to sell a controlling stake in its struggling Japanese unit to Softbank Corp in a deal likely to be valued at more than 1 trillion yen.
"M&A activity is likely to prove supportive for sterling and with recent economic data suggesting there is no risk of lower rates any time soon, I think the backdrop remains fairly constructive," said Jeremy Stretch, strategist at Rabobank.
The Bank of England cut rates to 4.50 percent last August. Recent upbeat data, such as Friday's services PMI, have dampened expectations of another cut in coming months, although a slim majority of economists still forecast such a move. By 1510 GMT, sterling was down 0.1 percent at $1.7521 after rising to the high of $1.7624. Against the euro it was steady at 68.63 pence, recovering from a three-week low of 68.74 hit earlier.The pound also rose on a trade-weighted index. Against the yen sterling rose to a one-week high of 206.12.