The pound recovered more ground against the dollar after a sharp fall last week, rising 0.2% to $1.2537 in early European trading on Tuesday.
Sterling rose during Monday's session after a Washington Post report said advisers to newly elected US President Donald Trump were considering a narrower set of trade tariffs that would be universal but apply only to what are considered crucial imports .
However, Trump denied the report soon after, writing on social media that the story “falsely states that my tariff policy will be rolled back. That is wrong.”
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The pound fell slightly later in Monday's session but has since bounced back against the dollar after being hurt by last week's rise in the dollar.
Sterling fell to an eight-month low of $1.2353 last week as the dollar rallied on Trump's expectations of a supportive dollar policy when the former president returns to the White House later this month.
Meanwhile, the pound was little changed against the euro (GBPEUR=X), trading at €1.2045 on Tuesday morning.
Gold prices rose on Tuesday morning after some relief from dollar weakness due to confusion over trade rates.
Spot prices rose 0.1% to $2,640.78 per ounce, while gold futures rose 0.3% to $2,654.90 per ounce.
Gold prices were under pressure from a stronger dollar, as the precious metal is typically priced in US currency.
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However, investors tend to look to investments in safe havens such as gold during times of geopolitical and economic uncertainty.
According to Reuters, IG market strategist Yeap Jun Rong said: “Gold prices have managed to stabilize as the US dollar cools somewhat overnight, but higher US Treasury yields could remain a key factor for further gains.”
While gold and bonds are both safe havens, the precious metal as a non-yielding asset is less attractive to investors if interest rates remain higher.
Despite a softer dollar, oil prices continued to fall on Tuesday morning, reflecting weaker economic data and lingering demand concerns.
Brent crude futures fell 0.3% to $76.07 per barrel, while U.S. West Texas Intermediate (WTI) crude fell 0.4% to $73.27.
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Matt Britzman, senior equity analyst at Hargreaves Lansdown (HL.L), said: “Weak economic data from the US and Germany outweighed bullish signals such as higher energy demand, a weaker dollar and higher prices in Saudi Arabia for Asian buyers .
