Sterling climbed off two-week lows on Wednesday on second Brexit vote hopes.
UK Opposition Labour finance spokesman said that he could accept a second Brexit referendum.
Barely four months before Brexit, Prime Minister May is struggling to find parliament support for the agreement she sealed with EU leaders.
The possibility of a no-deal Brexit sent the pound to a two-week low on Tuesday. However, the currency climbed as sentiment improved slightly when McDonnell made such comments. He quoted by the Guardian newspaper as saying a second Brexit referendum “might be an option we seize upon”.
After opening flat to weaker against the dollar and euro, sterling traded 0.3 percent higher by 1120 GMT at $1.2782. Earlier the British currency hit a session high of $1.2795. Against the euro, it was up 0.4 percent to 88.26 pence.
Currency traders are also assessing the government’s economic-impact report while a BoE analysis on Brexit’s implications will follow later.
Forex – Commodities – Second Brexit vote hopes lifts Sterling
The dollar index was little changed on the day on Wednesday before FED Chairman Jerome Powell is due to speak.
Sterling gained as investors positioned before the Bank of England’s release of its analysis of Britain’s exit from the EU.
Investors are also focused on the G20 summit in Buenos Aires on Friday and Saturday. Trump and his Chinese counterpart, Xi Jinping, are scheduled to discuss contentious trade matters.
Trump said that it was “highly unlikely” he would accept China’s request to hold off a planned increase in tariffs. That drove investors to safe-haven currencies such as the dollar.
Sources: Reuters, CNN money, BBC
PLEASE NOTE The information above is not investment advice.