May 22 (Reuters) - Sterling recovered some of its earlier losses against the dollar and the euro on Wednesday after a Sky News report that Prime Minister Theresa May was going to resign later in the day.
The currency had earlier fallen as much as 0.6% to a four-month low of $1.2625 and plumbed a three-month low against the euro at 88.39 pence. It had been trading around $1.2643 when the Sky report emerged but has since firmed to $1.2673 GBP=D3.
Versus the euro it is now at 88.06 pence EURGBP=D3.
"People are hoping a new leader could potentially unblock the Brexit deadlock but that's not guaranteed as the new leader will face the same parliament numbers," said Lee Hardman, a strategist at MUFG Securities.
May might resign tonight, Sky's chief political correspondent said, citing a senior lawmaker, but added it was unconfirmed.
(Reporting by Sujata Rao; editing by Karin Strohecker)
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