The pound slipped against a slew of currencies on Wednesday as the Prime Minister prepared to trigger Article 50, officially kicking off Brexit negotiations.
Sterling was recently down around 0.3 per cent at $1.2415 having on Tuesday briefly peaked above $1.26, a seven-week high, largely as a result of investors selling the dollar on doubts around Donald Trump’s promised tax and regulatory reform.
Earlier in the day the pound fell below $1.24. It was also down against the euro, the Swiss franc and the Australian dollar.
Ahead of Wednesday, the pound had oscillated and many strategists agreed that it was hard to predict its course over the next few weeks. Many say that after a more than 15 per cent fall against the dollar since June’s referendum, a hard Brexit scenario is now priced in.
But last week strategists at Deutsche Bank published an updated forecast, predicting the currency could still fall at low as $1.06 before recovering.
Many economists’ forecasts are more optimistic than Deutsche’, but few expect the currency to recover from its post-referendum lows any time soon.
"We’re in for a long period of volatility for the pound and UK assets as the government embarks on protracted and hugely challenging Brexit negotiations," said Neil Wilson, an analyst at ETX Capital.
"We could see it move lower still if negotiations take a sour turn - $1.10 is feasible," he said.
UniCredit strategists said that "political debate at home and negotiations with Brussels are [...] not expected to be smooth".
On Wednesday, some traders said that selling pressure might also be stemming from the Scottish parliament on Tuesday voting in favour of a second independence referendum.
Separately, Bank of England interest rate-setter Ian McCafferty on Tuesday highlighted a weak outlook for the economy, according to Reuters, and said he did not know if he would vote in favour of increase borrowing costs at the Bank’s meeting in May.
