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LONDON: Sterling edged higher on Friday after reports suggesting Britain wanted to de-escalate tensions with the European Union and renew efforts to find a solution over a Northern Ireland trade dispute. Sterling was under renewed pressure this week amid worries that disagreements between Britain and the EU could trigger major trade disruption.

Since leaving the EU last year, Britain has delayed the introduction of some border checks between the British province of Northern Ireland and EU-member Ireland. The Times newspaper reported on Friday that Britain was ready to step back, after threatening to invoke emergency unilateral provisions, and find an agreement with the EU.

Sterling edged 0.2% higher versus the dollar to $1.3385 at 0940 GMT, not far from its lowest level since December of $1.3354 touched overnight. It was set for its third consecutive week of declines versus the dollar. <GBP=D£> Against the euro, it rose 0.25% to 85.47 pence and was set for weekly gains after tumbling versus the single currency in the previous week.

"Today's move in the pound is reflective of easing Brexit tensions and the removal of downside risk to an already flagging growth narrative," said Simon Harvey, a currency analyst at Monex Europe.

Sterling fell more than 6% versus the dollar in the last six months as the British economy struggled with supply chain disruptions, shortage of workers and a fuel crisis. In the meantime, a surge in US inflation boosted the greenback amid bets that the Federal Reserve would hike interest rates faster than expected.

Triggering a sterling sell-off, the Bank of England left its main interest rate unchanged at 0.1% in its November policy meeting, having previously signalled it could raise it. Markets are now pricing in a high probability of a December rate rise but uncertainty remains high. Britain's Brexit minister David Frost will meet with the European Commission's Maros Sefcovic in London on Friday to discuss changes to trade rules.

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