Sterling rebounds from 3-week low

Britain's pound edged up against the dollar on Monday, with a weaker US currency helping sterling rebound from a three-week low reached last week after the EU's chief Brexit negotiator warned a transition deal was far from assured.

Last week sterling suffered its biggest falls against the dollar since October, hit first of all by broad strength in the US currency amid a sharp stock market sell-off and then by worries that Britain could leave the European Union in a disorderly manner, triggered by Michel Barnier's warning.

The pound's weekly losses came despite a surprisingly hawkish policy meeting from the Bank of England, which said interest rate rises could come sooner and more quickly than investors were expecting.

Markets moved to price in a 70 percent chance of a rate hike in May after the meeting, and sterling jumped by more than 1 percent against the dollar and euro, but its gains were shortlived.

With equity markets recovering from last week's slide on Monday, however, the return of risk appetite encouraged investors to sell dollars and buy back into riskier currencies.

The pound rose 0.3 percent to $1.3863. It was flat against the euro at 88.54 pence.

"This [sterling's move higher] is on the back of the broader dollar sell-off," said London-based Michael Hewson, analyst at CMC Markets. "The pound got hit quite hard on Friday. We are getting a little bit of a rebound."

Hewson said inflation data due on Tuesday would be important in determining sterling's direction, and that wages numbers due next week would be even more crucial as they would help shape the market's expectations for when and how fast the BoE would raise interest rates.

The pound has climbed more than 4 percent against the dollar over the past two months, on the back of perceived progress on talks with the EU on what a future relationship between the two will look like when Britain leaves in 2019, as well as some cautious optimism on the economy.