Sterling slipped against its major counterparts on Tuesday as traders took profits, ahead of the scheduled invocation of Article 50, and extended losses after images emerged in the press showing Theresa May signing the Article 50 letter in preparation for Wednesday’s notification.
The pound had rebounded strongly since late last week after retail sales figures showed consumer spending recovering from a two month slump during February.
This is while a recent vote by one of nine monetary policy committee members to raise the base rate has also bred renewed scepticism over the length of time that the Bank of England will be able to sustain the new record low for UK interest rates.
Sterling rose to trade as high as 1.2600 handle against the dollar on Monday before giving back some of its gains on Tuesday. It had risen by more than 450 points during the preceding fortnight.
Against the euro the pound rose above the 1.1600 handle late last week but has since ceded much of its gains following the weekend victory for Angela Merkel’s party in regional elections in Germany.
Relative to the Swiss franc and the Japanese yen the pound has fared less well and could suffer further losses in the short term as the acrimony of post-invocation Brexit negotiations begins.
Theresa May is set to begin Britain’s formal withdrawal from the European Union on Thursday by sending notification of the nation’s intention to withdraw, in accordance with Article 50 of the Lisbon Treaty.
This will mark the opening of a two year window during which both parties will have to establish the terms of their future relationship or agree to extend the negotiating period.