The pound rose on Monday off a five-week low on last week against the dollar and euro, which helped back some of the losses fuelled by the ebbing of interest rate bets.
Markets are pricing an interest rate rise at the Bank of England's December meeting, but uncertainty remains high after they were wrong-footed last week by policymakers who kept rates on hold at 0.1%. The markets had priced two rate hikes before the BoE meeting.
The sterling's weekly loss against the dollar went to almost 1.5% since August, while against the euro it fell the most since April.
The pound would be weighed down by the uncertainty sown by the BoE move, according to Sarah Hewin, a senior economist at Standard Chartered.
She said that sterling took a hit for the BoE, and that's why the signals were very unclear for the BoE. There is uncertainty built into policymaking from the BoE that makes sterling upside limited in the near term. The BoE decision will have left many speculators licking their wounds because of the data for the week to last Tuesday showing a $1.3 billion worth of bullish pound positions built ahead of the meeting.
The data from the U.S. Commodity Futures Trading Commission show a swing from a net short a month ago as the BoE seemed to guide rate expectations higher.
Last week's violent selloff wiped out much of that positioning, and by 1430 GMT pound firmed almost 0,5% against the dollar, moving off the $1.3425 low hit on Friday. That was a five-week low and a shade off the one-year low of $1.3412 touched at the end of September.
It went up against the euro, falling as low as 85.950 last week.
Derivatives markets are looking to flag downside. A risk reversal, which give the right to sell or buy, show a higher premium for pound put options than calls puts, which allow holders to sell Stephen Gallo, a strategist at BMO Capital Markets, said markets would want firm evidence of labour market strengthening before being confident of a December rate increase.
Last week's BoE policy decision demonstrated that higher- than expected CPI inflation won't be enough on its own to warrant a pre- Christmas tightening of policy, Gallo said.
Sterling is also feeling some pressure from rhetoric around the Article 16 clause which allows Britain or the European Union to take unilateral action if they deem the deal governing post-Brexit trade is hurting their interests.
Britain has threatened to invoke Article 16 around Northern Ireland trade arrangements, and Ireland"s foreign minister said on Sunday the UK government appeared ready to do so.
The EU feels that Britain wanted to collapse the talks by deliberately asking for what they know they can't get he added.