The dollar index, which measures the US currency versus a basket of six major rivals, hit a 22-month high overnight.

British Prime Minister Theresa May told her top team of ministers on Tuesday that talks with the opposition Labour Party aimed at finding a way forward on Brexit were serious but difficult in some areas.

The pound edged 0.1 percent higher at $1.2949, close to its lowest level since Feb. 19. Against the euro , the pound was 0.3 percent higher at 86.46 pence.

Some analysts saw some reason for optimism, given that a deal with the EU to delay Brexit until at least October had removed the imminent risk of Britain leaving the bloc without a deal.

"We are quite constructive about the outlook for the pound in the short term as a hard no-deal Brexit has been completely removed with the pound's relative undervaluation becoming an attractive proposition," said Nikolay Markov, a senior economist at Pictet Asset Management in London.

Data last week showed speculative net positions in the pound turned slightly in favor of holding long sterling positions for the first time since June 2018, according to data published by the US Commodity Futures Trading Commission.

Recent data has also been supportive for the pound. Data last week showed retail sales volumes surged by the most in nearly two-and-a-half years in annual terms, way above market expectations.