Sterling is expected to strengthen in the coming days ahead of a crucial European Summit where an important milestone for Brexit negotiations is set to be reached.
"You'd get a big move into the pound, if there's agreement to move to trade (negotiations)," Stephen Isaacs, chairman of the investment committee at Alvine Capital, told CNBC on Wednesday.
The pound hit a two-month high on Wednesday after media reports said that the U.K. government had increased its financial offer to the European Union – the so-called Brexit bill, which is what the U.K. could pay to fulfil its remaining obligations to the bloc before it leaves.
This increased the chances of a deal on the three main issues that have derailed the talks over the past months. Sterling was up 0.5 percent against the dollar, trading at $1.3405 at about 11:30 a.m. London time.
The EU and the British government haven't yet confirmed these reports of a financial contribution somewhere between 50 billion and 100 billion euros. However, the European Union is set to update on the ongoing Brexit negotiations in the coming days.