Sterling was little changed on Monday after a newspaper report suggested the British parliament might still reach a cross-party deal on Brexit, though doubts about such an agreement kept the currency from gaining.
Up to 150 lawmakers from Britain's opposition Labour party would reject an agreement that did not include a referendum confirming it, the Guardian newspaper reported shadow Brexit secretary Keir Starmer had said.
Many members of the ruling Conservative party oppose a second referendum, but the fact talks are still being held is keeping sterling from booking losses, analysts said.
"Most investors would see a sterling-positive view on a second referendum," said Rabobank FX strategist Jane Foley.
Sterling was flat at $1.30 against the dollar -- roughly the middle of the $1.2851-$1.3190 range of recent weeks -- and 86.33 per euro.
Investors will also be unwilling to commit too far either way before UK labor market data due on Tuesday. The British economy has outperformed expectations, but the market will be watching for signs that stockpiling by British companies before Brexit has hurt employment, Foley said.
"Recent better UK data are likely to be a high point in positive sentiment. Driven by stock-building, a period of payback is likely," Natwest Markets said in a note.
With business investment curtailed by Brexit uncertainty, the Bank of England is unlikely to raise interest rates, they said.
Sterling buyers brushed aside an opinion poll that showed UK Prime Minister Theresa May's Conservatives had slumped to fifth place before European parliamentary elections and Nigel Farage's Brexit Party had surged. (Reuters)