Britain is due to leave the European Union on Friday but May is seeking a compromise with Labour leader Jeremy Corbyn on the terms of the UK's divorce ahead of an EU leaders' summit on Wednesday.

A compromise would support her request to delay Brexit until the end of June and the BBC reported that May could offer to remain in a permanent customs union with the bloc to win the support of Labour.

With so much uncertainty -- possible scenarios include a deal-based exit, no deal and no Brexit at all -- the pound has been stuck this month between $1.3-1.32. But analysts say it could break out of that range this week.

"We are assuming another extension will be granted, but it is far from a done deal and there could be number of twists and turns in the week ahead resulting in a volatile pound," said Lee Hardman, a currency analyst at MUFG in London.

The pound traded up 0.2 percent at $1.3064 and was a fraction higher against the euro at 85.90 pence

The impact of a long Brexit delay on sterling is unclear. The pound would gain if a delay led eurosceptic lawmakers to back the deal May negotiated with the EU or brought about a reversal of the 2016 Brexit referendum.

Investors concerns about big swings in the pound have subsided somewhat according to one-month implied volatility gauges which are at their lowest levels in four-weeks.