The euro briefly rallied to the day's highs on Thursday after Britain and the European Union agreed in principle to a text setting out their future relationship before a summit on Sunday.
European Council President Donald Tusk said the text had been discussed by British Prime Minister Theresa May and European Commission President Jean-Claude Juncker and plans to have a trading relationship on goods that is "as close as possible, with a view to facilitating the ease of legitimate trade."
The single currency rose as much as 0.4 percent on the news, hitting a day's high of $1.1434 before trimming gains to stand up 0.3 percent on the day at $1.14155. Sterling surged more than a percent to $1.2928.
"This is encouraging news from an investor perspective as it gives some much needed clarity to investors and companies on both sides but unless political support is garnered, these gains may not be sustained," said Jane Foley, a senior FX strategist at Rabobank based in London.
The euro's bounce against the dollar rippled through other currencies as well, with the single currency rising half a percent against the Norwegian crown and a quarter of a percent versus the Swiss franc.
However, gains were limited as focus turned on the minutes of the European Central Bank's October meeting where analysts said they would be looking for any signs that the ECB was mulling a fresh round of policy support to banks to support the euro zone economy.