Fears of the consequences of a hard Brexit have sent the pound to a fresh 31-year-low against the dollar, excluding last October's flash crash.
The pound hit new lows after reports said that Prime Minister Theresa May will on Tuesday signal plans to quit the EU’s single market to regain control of Britain’s borders, in a speech which is expected to give the most detailed insight yet into her approach to the forthcoming negotiations with Brussels.
The Prime Minister’s office declined to comment on the reports.
Sterling fell against all of its major peers, dropping below $1.1985 against the dollar in early Asian trade on Monday, before recovering slightly to just above $1.20.
This is a more than three-decade low for the currency, excluding the flash crash on 7 October that sent the pound plunging more than six per cent to $1.18.
Fears among currency traders and investors that the UK is heading for a hard Brexit – in which access to the EU’s single market would be sacrificed in favour of tighter control over immigration – have tended to weaken the pound while suggestions that the UK could retain access to the EU single market have helped it recover.
Sterling is down against the dollar by about 19 per cent since the Brexit vote, with declines since mainly sparked by concerns that Ms May would pursue a so-called hard Brexit.
City analysts are anticipating Ms May's speech on Tuesday with a sense of gloom.
“The market is now positioning for some fairly punchy rhetoric from Theresa May and this idea of a ‘hard Brexit’ and a clean break from the single market seems increasingly likely, with the government making a bid to gain full control over immigration,” said Christ Weston, chief market strategist at IG markets in Melbourne, according to Business Insider.
Reuters economists have forecast sterling will slump to a fresh-low when Theresa May starts official proceedings to leave the bloc in March.
