The pound has fallen against the euro and the dollar, as traders reacted to the growing prospect of a no-deal Brexit.
But news that Prime Minister Boris Johnson will travel to Brussels in a last-ditch effort to salvage a trade deal with the EU, caused it to recover some losses.
Sterling fell about 1% to €1.098 in afternoon trading in London, its lowest level in more than six weeks.
Later it rebounded slightly to €1.10.
The pound also slipped against the dollar before recovering ground to trade 0.49% lower at $1.34.
Traders' hopes were raised when it was announced Mr Johnson will meet with European Commission President Ursula von der Leyen later this week.
UK and EU negotiators have been locked in talks to secure a post-Brexit deal before 31 December, when the UK's transition period ends.
Disputes over fishing and business rules remain, with the UK government saying discussions in Brussels have reached "a critical moment".
The EU mood was described as "gloomy" as chief negotiator Michel Barnier met UK counterpart Lord Frost.
The pair will continue talks on Tuesday, drawing up a list of the differences that remain between the two sides.
Cabinet Office minister Penny Mordaunt told the House of Commons: "We are all working to get a deal, but the only way that's possible is if it's compatible with our sovereignty and takes back control of our country's trade and waters."
Asked when the cut-off point for a deal was, a European Commission spokesman said: "We are not going to speculate on a last-chance date.
"We are fully committed to substantial negotiations. We've always said and continue to say it's the substance that prevails over timing."
Earlier, Irish Foreign Minister Simon Coveney described the EU negotiating team's frame of mind as "gloomy" and "downbeat".
The FTSE 100 share index drifted in and out of positive territory during the day, and finished virtually flat at 6,555 points.
Investors are also awaiting an EU summit starting on Thursday to break an impasse over a 1.8 trillion-euro coronavirus aid package, as well as the last European Central Bank policy meeting of the year on the same day.
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