Sterling jumped briefly past $1.24 for the first time in more than three weeks on Thursday after a UK court ruled the government must seek parliamentary approval to begin the formal process of leaving the European Union.
The pound rose by just under a full cent to $1.2450 before retreating on signs that, as many in markets had expected, the government could appeal the ruling at a hearing in early December.
“Sterling has rallied again on the government loss in the High Court over Article 50, but the upside will likely be limited given appeal,” said Neil Jones, head of hedge fund FX sales at Mizuho in London.
British gilt futures slipped to a session low before recovering and were last down 15 ticks on the day at 125.75 - only a little below their level before the ruling.
The yield on Germany's 10-year government bond, the euro zone's benchmark, rose to a day's high of 0.17 per cent, up 4 basis points on the day.
The pan-European STOXX 600 index extended gains and was last up 0.4 per cent, boosted by the banking sector, which also gained further to trade 1.5 per cent higher.
By 1024 GMT, sterling was up 0.8 per cent on the day at $1.2410. It rose 0.9 per cent to 89.40 pence per euro.