The pound rebounded against the dollar Friday, a day after a severe shellacking, as some investors were willing to bet on Prime Minister Theresa May getting a controversial Brexit draft deal through parliament, dealers said.
Even as dark clouds continued to gather over the prime minister's political future, many felt she might just get enough support for what she called "the best deal for Britain", they said.
"The pound is holding on to its early Friday morning gains, on the back of UK PM May's radio interview in which she said her deal was the best Brexit compromise the UK could achieve," said Dean Popplewell, an analyst at Oanda.
In the late European afternoon the pound was up around 0.6 percent against the dollar, off earlier highs, but slightly down against the euro.
The UK currency had slumped 1.7 percent against the dollar on Thursday, the biggest daily drop for more than two years.
But analysts warned that the outlook for the British currency's trajectory was uncertain.
- 'Short-lived' -
"Stability in the pound... could be short-lived, with clamours for a vote of no confidence from Conservative Brexiteers meaning the political upheaval will continue as we end the week," said Joshua Mahony, market analyst at IG trading group.
May made a rare outing on a radio phone-in after a tumultuous Thursday in which ministers resigned and members of her own party plotted to oust her.
Brexiteer MPs fear the draft deal would keep Britain shackled to the Brussels, while EU supporters say it would leave the UK on worse terms than it has inside the bloc.
Meanwhile in European stock markets, Brexit fears kept prices down, with banking shares particularly under pressure "over concerns of a disorderly UK exit from the European Union", said analysts at Charles Schwab.
On Wall Street, the tech sector was sold again after results or guidance from chip makers Nvidia and Applied Materials, they said.
- Oil up -
Asian stock markets earlier swung throughout Friday's session as investors weighed China-US trade speculation.
Hopes that the world's top two economies are making efforts to resolve their painful tariffs standoff provided support to global markets, though conflicting reports were keeping any optimism in check.
On Thursday it was reported that China had handed the US a number of trade concessions as part of a move to smooth relations ahead of a G20 summit where Donald Trump is expected to meet Chinese President Xi Jinping.
The Financial Times said the two sides were stepping up efforts and that US Trade Representative Robert Lighthizer had told business leaders the next round of tariffs would be put on hold. While Lighthizer's office denied that, observers said the news still provided some hope.
In commodities trading, oil prices were higher, having been weighed down by oversupply and weak demand concerns earlier this week.
Despite data showing another jump in US stockpiles the commodity is enjoying some much-needed buying interest after kingpin Saudi Arabia said it plans to cut output and called on other producers to follow suit.
Prices were, however, well off early highs by the late European afternoon.
- Key figures around 1645 GMT -
Pound/dollar: UP at $1.2836 from $1.2778 at 2200 GMT
Euro/pound: UP at 88.88 pence from 88.64 pence
Euro/dollar: UP at $1.1409 from $1.1325
London - FTSE 100: DOWN 0.3 percent at 7,013.88 points (close)
Frankfurt - DAX 30: DOWN 0.1 percent at 11,341.00 (close)
Paris - CAC 40: DOWN 0.2 percent at 5,025.20 (close)
EURO STOXX 50: DOWN 0.3 percent at 3,180.74
New York - Dow: FLAT at 25,283.16
Tokyo - Nikkei 225: DOWN 0.6 percent at 21,680.34 (close)
Hong Kong - Hang Seng: UP 0.3 percent at 26,183.53 (close)
Shanghai - Composite: UP 0.4 percent at 2,679.11 (close)
Oil - Brent Crude: UP 57 cents at $67.19 per barrel
Oil - West Texas Intermediate: UP 40 cents at $57.08