The pound has staged a small recovery against the dollar - up 0.40% to $1.2902 - however, it is not enough to make up for Monday's drop after investors took fright about uncertainty over a Brexit deal.
Reports suggest that late night talks in Brussels ended with "optimism on both sides", although no final Brexit deal has been agreed.
Sterling is up 0.17% against the euro at €1.1475.
It's a volatile day for the pound, which has now come off its lows.
The market is said to be reacting to a report in the Financial Times saying the EU's Brexit negotiator, Michel Barnier, had reportedly told ministers from the EU’s remaining 27 member states that the main elements of a Brexit text are ready.
Sterling is now trading down 0.93% against the dollar at $1.2854.
The pound is also 0.20% lower against the euro at €1.1423.
Reports suggest that Prime Minister Theresa May may not get Cabinet backing for a draft Brexit withdrawal deal this week and is struggling to reach an agreement with Brussels.
Marc Chandler, chief market strategist at Bannockburn Global Forex, says: "While some European officials are still sounding optimistic that an EC-UK deal can be struck in the coming weeks, the market has grown more sceptical."
Sterling is now down 0.82% against the dollar at $1.2868 as uncertainty over the Government reaching a deal on Brexit increases.
The pound is down 0.28% against the euro at €1.1414.
The pound has dropped 0.61% against the dollar at $1.2895 on reports that there is growing opposition within the Cabinet over Prime Minister Theresa May's final Brexit deal.
Sterling is down 0.39% against the euro at €1.1401.
On Friday, Transport Minister Jo Johnson stepped down and called for another referendum.
Sim Moh Siong, currency strategist at Bank of Singapore, says: "Eventually, the EU and May will come to a deal.
"Both parties want to conclude the deal, but the only risk is whether May will still be Prime Minister. I expect sterling to remain choppy in its recent wide range."
It has been an unsettled day so far for the pound.
Sterling is now at $1.3005 against the dollar, up 0.30%.
It is also 0.35% ahead against the euro at €1.1426.
Now that Mario Draghi's press conference at the European Central Bank has ended, here's the euro against the dollar.
Earlier gains have now been eroded.
"There were no new details on monetary policy but the big question asked was whether the ECB would use its tool kit to respond to problems in Italy? He didn't answer that question. Markets are slightly unnerved," Ulrich Leuchtmann, a currency strategist at Commerzbank told Reuters.
Sterling is still around $1.293 amid political and Brexit uncertainty.
The dollar, though, is also stronger against the euro. The US currency has jumped almost 1% against Europe's single currency after data showed that eurozone business growth was not rising as quickly as expected.
Bloomberg points out that according to its dollar gauge the dollar is at its strongest level since the summer of 2017.
Italian borrowing costs have hit fresh four-and-a-half year highs after the European Union criticised Italy's draft budget.
The European Commission said the proposed budget - which would lead to a bigger deficit - was an "unprecedented" breach of EU fiscal rules.
Worries over a potential impasse between the Commission and Italy have been rattling the markets for some weeks, and on Friday morning the yield on Italy's benchmark 10-year bonds climbed to 3.74%, the highest rate since February 2014.
The pound has slipped a third of a cent to trade at $1.3111 after Brexit talks between the UK and the EU faltered over the Irish border.
Sterling is also down a third of a cent against the euro, at €1.1352.
Kathy Lien, managing director of foreign exchange strategy at BK Asset Management, says: "The clock is ticking and a deal is drawing close but having been burned by false hopes, investors are ignoring the conflicting headlines and waiting for official confirmation."