Pound Sterling slips over Brexit uncertainty; investors await Trump clarity

Pound sterling

Pound Sterling slipped to three month lows and measures of anticipated swings for the pound climbed ahead of U.K. Prime Minister Theresa May’s speech on Brexit plans Tuesday and a Supreme Court ruling this month on whether the British leader or Parliament carries the power to invoke the exit; while U.S. policy uncertainty lingered prior to President-elect Donald Trump's inauguration.

 The pound slid after the Sunday Times reported that May will prepare to withdraw from tariff-free trade with the European Union in return for freedom to curb immigration and strike commercial deals with other countries. While hedge funds started to boost bets against sterling from the end of last year, Bank of Tokyo-Mitsubishi UFJ Ltd. said the court ruling could spur investors to unwind these short positions.

The pound fell as much as 1.6 percent on Monday to $1.1986, the weakest level since Oct. 7 when it slid to $1.1841, the least since 1985. Sterling was 1.2 percent down at $1.2037. The pound pared losses after the U.K. Treasury was said to plan to calm investors after her speech on Tuesday and the Times of London reported Donald Trump would offer a quick trade deal to Britain when he assumes power.

The pound may come under broad‑based downside pressure this week as faster inflation is expected to push U.K. real interest rates further below zero, according to Commonwealth Bank of Australia.

All eyes will then be on Trump's inauguration on Friday for any clarity on his economic plans.

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