The report in London's Evening Standard newspaper "points towards the increasing likelihood that the UK will extend Article 50", said Lee Hardman, currencies analyst at MUFG.

Britain is due to leave the EU on March 29.

Sterling jumped half a percent to the day's high of $1.2851  to hit the highest since late November. Versus the euro the pound rose 0.3 percent to 89.80 pence per euro.

Britain's internationally-exposed FTSE 100 fell to the day's low.