Strong US job growth data on Friday was counterbalanced by slower increases in wages, resulting in money market traders sticking to bets that the Fed would raise interest rates three times this year, encouraging investors to add bets against the struggling greenback.

The British currency rose 0.2 percent to $1.3870 against the dollar, broadly in line with other currencies but is still some way below a post-Brexit referendum vote high of $1.4346 in late January.

But against the euro, sterling was flat at 88.84 pence as traders were worried that Britain and EU officials would fall short of securing a transition arrangement at a March 22-23 summit as differences have grown in recent days.

"We expect euro/sterling to be very volatile in the run up to the summit due to the conflicting headlines we have seen in recent weeks and as such we remain cautious on the British currency's outlook," said Morten Helt, a currency strategist at Danske Bank.

Latest positioning data also indicated an undercurrent of nervousness about the British currency with net long sterling positions slashed to their lowest since early December.

Finance minister Philip Hammond looks set to announce Britain's smallest budget deficit since 2002 this week but he is still likely to resist calls to loosen his grip on public spending for now.