Sterling slipped against a resurgent dollar on Tuesday but held steady against the euro as the prospect of merger-related money flows into Britain lent support to the pound.
Dutch Philips Electronics agreed to buy British baby-feeding product maker Avent for 460 million pounds ($864 million) in cash as the TVs-to-shavers conglomerate looks to expand its appliances business.
On Monday, French bank Credit Agricole said it was considering making a take-over bid for UK bank Alliance & Leicester, which analysts said could kick-start a 6-billion-pound ($11.3 billion) bid battle.
"M&A was a factor lending some support earlier but cable is moving with the dollar," said Geraldine Concagh, economist at AIB Group Treasury in Dublin.
Deutsche Bank estimates that the UK has received $20.4 billion worth of M&A flows in the year to date, the most among major economies.
By 1415 GMT, sterling was down a third of a percent at $1.8803 as the dollar rose after US stocks opened stronger.
The pound traded at 68.12 pence per euro, flat on the day.