LONDON: Sterling rose against a broadly weak dollar on Wednesday after three days of losses as British Prime Minister Boris Johnson headed to Brussels for dinner with European Commission President Ursula von der Leyen in a last ditch attempt to avoid a no-deal Brexit.

With only days to the end of the Brexit transition period, traders are hopeful that a face-to-face meeting between UK and European Union leaders can break the deadlock.

In a week marked with high volatility, the British currency fell to a near three-week low on Monday as leaders failed to resolve their differences in the broader trade talks, raising concerns of a no-deal Brexit.

But Tuesday offered a glimmer of hope when Britain said it would drop clauses in draft domestic legislation that breach the Brexit Withdrawal Agreement after reaching an "agreement in principle" with the EU over a sticky negotiating point.

The British currency rose 0.5pc against the dollar on Wednesday in volatile trading at $1.3433 in early London trading, heading towards a 2-1/2 year high of above $1.35 hit last Friday.

Against the euro, sterling was 0.4pc higher at 90.27 pence, after falling to a seven-week low on Monday.

But in a sign that the latest markets moves were more of an indicator of panicky trading, overnight implied volatility gauges -- a measure of expected price swings -- rose to close to 25pc, touching the highest point since late March.

"The jump in implied volatility does suggest there has been a fall in confidence regarding the prospects for a deal," said Jane Foley, head of FX strategy at Rabobank.

"That said, after the recent selling pressure on the pound, some speculators are clearly viewing PM Johnson's trip to Brussels in a positive light and are reducing short positions," she added.

Ahead of the meeting in Brussels, one of PM Johnson's most senior Brexit-supporting ministers, Michael Gove, told BBC radio on Wednesday that Britain sees scope for a compromise on some of the sticky negotiating points.

German Chancellor Angela Merkel said the EU and Britain could still reach an agreement on a Brexit trade deal but added that she could not guarantee there would be a breakthrough at an EU summit on Thursday.

"The 'now or never' moment is here," said ING analysts in a note to clients. "The meeting will tell us a lot".