Sterling surged against the US currency, rising more than one percent to $1.3052.
The pound also rose to a one-month high against the euro at 88.96 pence.
The jump in value comes as Mr Barnier today revealed the EU is ready to strike a Brexit deal.
Speaking at a forum in Slovenia, he said it is “realistic” to expect divorce terms to be agreed within two months.
Viraj Patel, a currency strategist at ING in London, said: “It just shows that’s the key thing that people want to see – Brexit progress.
“You have a market that’s heavily short on sterling due to Brexit. It needs that tail risk to be taken off before sterling can rally.”
The pound has seen similar jumps in recent weeks as markets react to signs that a deal is close to being finalised.
On Friday, the currency was buoyed after Mr Barnier signalled the EU is open to discussing other ‘backstop’ solutions to the contentious Irish border issue.
How to avoid a hard border between Northern Ireland and the Irish Republic has proven to be one of the biggest hurdles to securing a Brexit deal.
Brussels had previously proposed just one contingency plan – the so-called ‘backstop’ – which would see Northern Ireland remain inside the EU’s customs union and large parts of its single market if a better solution is cannot be agreed.
But this has been rejected by Theresa May, who said such measures would jeopardise the future of the UK.
Craig Erlam, market analyst at OANDA, said: “Any scope for a deal to be achieved, particularly coming from one of the chief negotiators is a bullish signal.”
Polling by Reuters shows sterling could rise up to six percent in a year if a Brexit deal is secured.
The same data indicates the pound could plummet by as much as eight percent from its current levels if Britain leaves the bloc without an agreement in place.
But while Mr Barnier’s comments are one of the strongest indications yet that a deal is on the horizon, the Prime Minister would still need to convince parliament to back it.
Former junior minister Steve Baker today warned some 80 MPs are prepared to vote against any agreement based on Mrs May’s hugely unpopular Chequers plan.
Critics on both sides of the Brexit debate have warned the proposals are the worst of both worlds, delivering neither a clean break from Brussels or addressing concerns of Remainers.