Sterling edged up against the dollar on Friday, supported by broad weakness in the yen and talk of corporate flows that could spur demand for the British currency.
Analysts said sterling gains were likely to be short-lived however, given concerns the economy is teetering on the brink of another recession and speculation of more monetary easing from the Bank of England in coming months.
The pound rose 0.1% to $1.5289, paring gains after earlier climbing to as high as $1.5368. Technical resistance was expected at last week's high of $1.5412.
Sterling made strong gains against a broadly weaker yen, rising to as high as 152.52 yen, before paring gains to last trade up more than 1% on the day at 151.76 yen.
The Japanese currency slipped across the board after Japan said there was no objection to its aggressive monetary easing stance at the Group of 20 meeting.
Sterling was underpinned by talk of corporate activity flows. Traders said Verizon Communication's bid to buy Vodafone Group Plc's stake in Verizon Wireless and take full control of the U.S. mobile phone company looked closer after Verizon posted higher-than expected quarterly earnings and said it was "extremely confident" of a deal without major tax implications for shareholders.
Completion of a deal could involve heavy demand for sterling against the dollar.
The outlook for sterling remains clouded, however. Britain's economy is failing to rebound and growth figures due next week could show it in its third recession in less than five years.
"There has been a deterioration in economic data and if GDP data next week signals a triple-dip recession it increases the chance of more quantitative easing in May," a trader said. Comments from BoE policymaker Martin Weale further bolstered the chance of stimulus from the central bank.
Weale said on Thursday that the BoE had more room to loosen policy due to an improved inflation outlook. He was not one of the three BoE policymakers who voted to increase asset purchases at the last few BoE meetings.
Many analysts said that if the BoE refrains from policy easing in May, there is still a chance of more easing once new Governor Mark Carney takes over on July 1.
Quantitative easing involves pumping cash into the economy through bond buying and tends to weigh on a currency by increasing its supply.
The euro gained 0.3% against the pound to 85.67 pence, rising broadly after European Central Bank board member Jens Weidmann said interest rates in Europe were appropriate. His comments countered recent market expectations that the ECB could soon cut rates.
