Since Britain signed a transition agreement last month to cover the 21-month period after it leaves the European Union, concerns about Brexit have abated as investors focus on the state of the UK economy before an expected interest rate rise in May.

Sterling rose 0.1 percent against the dollar to $1.4104 on Monday after mortgage lender Halifax said that house prices rose by a stronger-than-expected 2.7 percent in the first three months of 2018.

The data is likely to bolster expectations that the Bank of England will raise rates next month by a quarter percentage point and reduce fears among investors that Britain's economy is too weak to stomach a second hike later in 2018.

However, house prices are still rising much more slowly than before the 2016 referendum decision to take Britain out of the European Union which hit confidence among many households as the pound's fall pushed up inflation.

"House prices recovering somewhat is a welcome piece of news given that one of biggest concerns after Brexit is how UK households will deal with falling house prices," said Valentin Marinov, head of G10 FX strategy at Credit Agricole.

Marinov said he had a moderately constructive view on the pound for 2018 and that with Brexit concerns on the back burner sterling could start to outperform a range of currencies, as oppose to just the dollar which has been weakened by US-China trade war fears.

"The pound seems to be emerging from under the Brexit cloud. The next time we'll start focusing on Brexit may be well into the third quarter so ahead of that we're really left with economic data to focus on," he said.

But some analysts say uncertainties over Brexit remain and that broad dollar weakness is keeping sterling above $1.40.

Against the euro, the pound strengthened 0.2 percent on Monday to 87.04 pence

Traders last week largely shrugged off tepid survey data and searched instead for more meaningful signs of economic weakness that could deter the BoE from its path of monetary tightening.