Sterling strengthened broadly on Monday, recouping about half the losses registered the previous session as investors trimmed bets against the currency ahead of a busy week featuring central banks' policy meetings.
The pound gained against the dollar and euro, and was also higher against the yen as early gains in stocks helped underpin so-called carry trades, where investors sell low-yielding currencies such as the Japanese currency to fund purchases of higher-yielding assets.
Sterling, which has the highest interest rates in the Group of Seven industrialised nations, was hammered last Friday after weak UK manufacturing sector data boosted expectations that the Bank of England will cut interest rates when it meets on Thursday.
At 1500 GMT the pound was up 0.5 percent against the dollar at $1.9743, while the euro was down 0.4 percent at 75.01 pence. Sterling rose 0.7 percent against the yen to 210.82 yen. The pound has fallen around 2 percent on a trade-weighted basis since the turn of the year as a slew of negative data has bolstered the case for more UK interest rate cuts. The BoE cut rates a quarter point in December to 5.50 percent, and is widely expected to take a similar step on Thursday.