Sterling drifts higher after three consecutive weeks of losses

Sterling drifted higher on Monday after registering three consecutive weeks of losses as investors waited for the outcome of Brexit talks between Britain and the European Union. British Prime Minister Theresa May plans to speak to every EU leader and the European Commission chief to seek changes to her EU withdrawal agreement, after another defeat from her own lawmakers last week.

While May has told EU leaders she could pass her deal with concessions primarily around the Irish backstop issue, the symbolic defeat in Parliament has weakened her negotiating hand and increased the risk of a "no-deal" Brexit in 40 days. "Prime Minister Theresa May is setting off to Europe to 're-negotiate'," Commerzbank strategists wrote in a daily note. "What a sad Sisyphean task! I cannot imagine that anyone assumes this might result in anything productive." The pound edged 0.1 percent higher at $1.2905. Against the euro it was broadly flat at 87.58 pence.

It rallied more than half a percent on Friday helped by reports of some hedge fund buying, a conciliatory tone on Brexit from the Irish foreign minister and strong British retail sales published earlier in the day. Broader currency markets were quiet with U.S. markets shut for a holiday. Derivative markets were cautious with two-month pound risk reversals, a gauge of calls to puts on the British currency, hovering near three-month lows, a sign that investors are more cautious about the pound's outlook in the near term.