Pound value: Sterling volatile against dollar and euro as Theresa May triggers Article 50

The pound fluctuated between losses and slim gains against a slew of currencies on Wednesday as the Prime Minister triggered Article 50, officially kicking off Brexit negotiations and a period of intense uncertainty for financial markets.

Sterling was trading around $1.2410 in late trading in London 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 sharply against the euro, the Swiss franc and the Australian dollar before recovering somewhat.

Ahead of Wednesday, the pound had oscillated and many strategists agreed that it was hard to predict its course over the next few weeks. Some said 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.

Some 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.

Saker Nusseibeh, chief executive of Hermes Investment, likened the triggering of Article 50 "to embarking in a raft or canoe down a very windy and dangerous set of rapids” for markets.

“All we know at present is that the journey is long, the path of the rapids will likely take unusual twists and turns, and that the ride will be turbulent,” he said.

Robert Bergqvist, chief economist at Nordicbank SEB also said that he does not expect to see a substantial rebound in the pound any time soon.

But he also said that “if negotiations should proceed smoothly and show signs of successfully reaching an agreement” then “the pound is likely to appreciate substantially compared to its level today”.

On Wednesday, some traders said that early selling pressure might also have stemmed from the Scottish parliament on Tuesday voting in favour of a second independence referendum.

Separately, on Tuesday Ian McCafferty, the Bank of England rate setter, highlighted a weak outlook for the economy, according to Reuters. He said he did not know if he would vote in favour of increase borrowing costs at the Bank’s meeting in May.