LONDON Sterling bounced back from its weakest point in two weeks against the dollar on Tuesday as investors jumped on signs of growing pressure on the government to give parliament a greater say in the final deal to leave the European Union.
Dealers said the pound's gains back towards $1.25 from an earlier low of $1.2347 were driven chiefly by junior Brexit minister David Jones' statement that parliament would be given a "meaningful" vote on the deal.
Jones later reiterated the harder line that there would be no renegotiation of the terms the government brings back to parliament. But the mixed messages were read as more evidence of pressure on Prime Minister Theresa May to soften a stance that prioritises control of immigration over membership of the bloc's lucrative single market.
"The messages this afternoon are not totally clear," said Alvin Tan, a strategist with Societe Generale in London. "What we do know is that there has been a rebellion of some form from government MPs. So I guess when this story came out people just jumped on it.
"At least there is a sense that there is some pressure on the government. The majority of MPs are in favour of maintaining some ties to the EU ... so a more meaningful role for parliament is seen as a positive thing."
The gains came after a rough few days for sterling, due largely to a run of surveys suggesting that the economy and consumer demand is finally softening in the face of Brexit-related risks.
Bank of England policymaker Kristin Forbes added to support for the pound by saying the bank should raise interest rates soon if growth remains solid and inflation continues to accelerate.
By 1700 GMT, sterling traded up 0.1 percent on the day at $1.2480 and 0.7 percent stronger against a broadly weaker euro at 85.65 pence.
Further batches of downbeat data - this time from the BRC measure of retail sales and the first fall in UK house prices since the vote to leave the European Union last June - may add to jitters in the days ahead.
While Forbes was read as sounding a harder line on rates than the BoE last week, the data has highlighted concerns over how consumers will bear up in the face of price rises caused by an almost 20 percent fall in sterling.
The British Retail Consortium numbers showed consumers reined in their spending last month in comparison to a year earlier. Data from mortgage lender Halifax Bank of Scotland showed British house prices fell 0.9 percent in January alone after a 1.6 percent surge in December, compared to expectations prices would hold flat on the month.
"Retailers normally hedge a full season out. So you will really start to see the effect of the pound weakening in March and April on sourcing inflation," said Mark Horgan, chief executive of corporate and consumer foreign exchange firm Moneycorp in London.
"The question is how much (of the price rises) firms will push through to their customers. Clearly petrol stations for example have already pushed through quite a lot but there is obviously more to come."
(Writing by Patrick Graham; Editing by Nigel Stephenson)