LONDON Sterling traded just over a cent above this week's lows against the dollar and steadied against the euro on Friday, with several Bank of England policymakers due to speak and markets keen for clues on whether another cut in interest rates is likely.
The pound has found a foothold after a round of heavy losses this week, sparked by last Friday's tumble, but some investors are still prepared to back it to recover much of that ground.
European Council President Donald Tusk, who will run the Brussels side of Britain's negotiations on leaving the EU, warned on Thursday that the bloc will not offer London any softer terms than a "hard Brexit".
Worries about the economic fallout of Britain losing access to the single market under such a scenario are at the heart of the pound's decline in the past three weeks.
The Bank of England has already cut interest rates and relaunched quantitative easing in a bid to offset any damage to growth over the next year.
BoE governor Mark Carney and several colleagues appear at a Future Forum in Birmingham on Friday.
"We are heading into crunch time for the pound as the various parties stake out negotiating positions, so we would expect news flow to remain rather challenging in the near-term," BNP Paribas analysts said in a morning note.
"(But) our positioning framework suggests short positioning in GBP is getting increasingly stretched."
By 0720 GMT, sterling was flat at 90.24 pence per euro and just under half a percent weaker against a broadly stronger dollar at $1.2196.
"The pound is soft but stable this morning, trading marginally above 1.22 as it feels the brunt of the dollar," Western Union head of corporate treasury sales, Tobias Davis, said.
"The lead today will be taken from the (United) States and broader global risk sentiment."
(Editing by Louise Ireland)