The British pound rose sharply Wednesday versus the dollar on renewed investor optimism about the UK government reaching a Brexit trade deal with the European Union, analysts said.
At about 1255 GMT, sterling jumped as high as $1.3097 to strike its highest level in almost one and a half months. It later stood at $1.3080, up 1.0 percent from late Tuesday.
The European single currency meanwhile was down 0.7 percent at 90.67 pence per euro.
"The gains (for the pound) have come on the back of optimism that a breakthrough in Brexit talks is close, which may mean the UK will avoid a no-deal exit after all," said analyst Fawad Razaqzada at trading site ThinkMarkets.
Sterling also won support from official data showing a rise in UK inflation, which reached 0.5 percent in September after a near five-year low of 0.2 percent in August.
In Brussels on Wednesday, EU negotiator Michel Barnier declared that Europe is ready to move to break the Brexit stalemate, in comments welcomed by London that raised hopes negotiations could be saved.
"I think an agreement is within our grasp, if we are, on both sides, ready to work constructively and in a spirit of compromise," Barnier told a session of the European Parliament in Brussels.
Barnier's comments came ahead of a third phone call in three days with his UK counterpart David Frost, who last week had announced that talks were effectively over.
Britain abruptly froze the negotiations after EU leaders at a summit said it was up to Britain, not the EU, to make concessions, which London took as an affront.
The pound had fallen below $1.29 on Friday after UK Prime Minister Boris Johnson had warned he was ready to walk away from EU trade talks and prepare for a "no-deal" Brexit.