The pound strengthened against its major counterparts in the European session on Friday, as fears over a no-deal Brexit reduced following a media report showing progress in contentious Irish backstop clause.
The Times reported that the DUP had agreed to soften its stance on a Northern Ireland only backstop to help unlock a deal.
The DUP leader Arlene Foster dismissed the report, saying that he would not support a deal that divide the internal market of the U.K.
But sources do not exclude the possibility of a deal, if it would be backed up by a legally binding guarantee for the DUP.
Boris Johnson will meet European Commission President Jean-Claude Juncker in Luxembourg next week.
Markets welcomed indications of easing trade tensions between the US and China.
U.S. President Donald Trump said he could consider an interim trade deal with China ahead of high-level negotiations in October.
Sentiment lifted up after the European Central Bank slashed interest rates for the first time since 2016 and unveiled a sweeping stimulus package to boost growth in the ailing euro zone.
The currency has been trading in a positive territory against its major counterparts in the Asian session, excepting the euro.
The pound appreciated to 1.2476 against the greenback, its biggest since July 25. At yesterday's close, the pair was worth 1.2329. Should the pound strengthens further, it is likely to face resistance around the 1.27 region.
The pound spiked up to a 7-week high of 134.71 against the yen from yesterday's closing value of 133.31. The pound is likely to challenge resistance around the 136.5 region.
Final data from the Ministry of Economy, Trade and Industry showed that Japan's industrial production expanded as estimated in July.
Industrial production rose 1.3 percent month-on-month in July, in line with the preliminary estimate.
The U.K. currency strengthened to 1.2317 against the franc, a level unseen since July 26. The pair had closed Thursday's deals at 1.2206. The pound is seen finding resistance around the 1.25 mark.
Having declined to a 3-day low of 0.8974 against the euro at 9:15 pm ET, the pound reversed direction and edged higher to 0.8899. The pound is poised to challenge resistance around the 0.86 mark.
Data from Eurostat showed that the euro area trade surplus increased in July on higher exports.
The trade surplus rose to a seasonally adjusted EUR 19 billion from EUR 17.7 billion in June.
Looking ahead, U.S. retail sales and export and import prices for August, business inventories for July and University of Michigan's consumer sentiment index for September are slated for release in the New York session.