The currency market welcomed UK Finance Minister Kwasi Kwarteng's announcement to cancel the tax cut plan previously launched by the government.
The pound surged in the European session, trading around one-week highs after rising nearly 1% after the report was released.
Kwarteng later made a statement on his Twitter, saying that the government would not go ahead with the plan.
Meanwhile, the US dollar remained traded weaker with limited movement as market focus was focused on the publication of US ISM manufacturing data in the New York session.
Capitalizing on the weakness of the US dollar, the euro traded higher although it was essentially flat at around 0.98100 against the greenback.
In Asia, the yen fell further, erasing almost all of the gains made following Japan's earlier intervention announcement.
On Monday, Finance Minister Shunichi Suzuki reiterated Japan's stance to act in the foreign exchange market if the yen's erratic movement continues.
On the other hand, the antipodean currencies Aussie dollar and kiwi traded positively ahead of the central bank policy meetings of Australia and New Zealand this week.
