Prime Minister Theresa May said on Monday it was wrong to say a "hard Brexit" was inevitable, after sterling fell to a 10-week low following comments interpreted as a signal she would prioritise border controls over EU market access.
In her first televised interview of the year on Sunday, May denied that Britain would face a "binary choice" between curbing immigration and having preferential access to the bloc's single market.
But investors viewed the comments as a sign Britain was headed for a hard Brexit, sending sterling down more than 1 per cent.
May denied that a 'hard' Brexit was the only possible option.
"I'm tempted to say that the people who are getting it wrong are those who print things saying I'm talking about a hard Brexit, (that) it is absolutely inevitable there's a hard Brexit," May said.
"I don't accept the terms hard and soft Brexit. What we're doing is going to get an ambitious, good and best possible deal for the United Kingdom in terms of ... trading with and operating within the single European market."
May said she had not said anything new in her Sunday interview.
"I'm ambitious for the sort of relationship we can have with the EU when we leave membership of the EU, but we musn't think of this as sort of leaving the EU and trying to keep bits of membership, what bits of membership will we keep," she said.
"It's a new relationship, we'll be outside the EU, we will have a new relationship but I believe that can be a relationship which has a good trading deal at its heart."
Earlier, her spokeswoman said May was ruling nothing in or out before starting departure talks with the EU.
Former UKIP leader, and Leave campaigner, Nigel Farage, has criticised Mrs May for what he sees as dragging out the leaving process.
"I did give her the benefit of the doubt, but seven months is simply too long," he said on a popular London radio station.
"Nothing has happened during that period of time, absolutely nothing, and I think the Economist magazine have got their front cover this week absolutely right."
German Chancellor Angela Merkel has previously said Britain can not pick and choose which bits of EU membership it would like to keep.
"Access to the single market is only possible on the condition of respecting the four basic freedoms," she said.
"Otherwise one has to talk about limited access. These negotiations can't be based on cherry-picking because that would have disastrous consequences on the other 27 member countries."
- with AAP
