British pound falls in Asia as markets brace for 'hard' Brexit speech

Sterling slumped to three-month lows in thin Asian trade on Monday with investors again concerned by media reports that the British government is prepared to make a "hard" exit from the European Union.

The pound (: GBPUSD=) fell 1.04 percent against the dollar at $1.2047 during early Asian time, after falling as low as $1.1979 earlier. This was the most the dramatic fall since last October when the pound nosedived to a three-decade low at $1.1819 amid fat-finger speculation and Brexit fears.

The euro (Exchange: EURGBP=) was quoted up 0.85 percent at 0.8816 pounds, while sterling fell 1.4 percent on the safe-haven yen (Exchange: GBPJPY=) to 137.69 yen. The Japanese currency gained broadly, with the U.S. dollar dipping to 114.28 yen (: OSEJPY=).

Theresa May will announce a "clean and hard Brexit" and prepare to pull the U.K. from the European market and the European customs union in exchange for the ability to control immigration laws and leave the jurisdiction of the European Court of Justice, the Sunday Times reported.

May intends to launch by the end of March the formal process of negotiating the terms of Britain's exit from the EU, but has so far given very little away about what deal she will be seeking, frustrating some investors, businesses and lawmakers.

Brexit Secretary David Davis also wrote in the Sunday Times that the U.K. is seeking to negotiate a completely new partnership with the EU, and signaled that there may be a transitional deal so as to give businesses time to adjust after the split.

Markets have been worried such a decisive break from the single market would hurt British exports and drive foreign investment out of the country.

This week is expected to extremely volatile for the British currency, as there is also the possibility that the U.K. Supreme Court could announce its ruling over whether May has the parliament's permission to trigger Article 50, which is a piece of legislation that kickstarts the Brexit process.

The British Prime Minister's speech on Tuesday is expected to soften relations with the EU and clarify the type of relationship her government will seek with the politico-economic union, said Majtaba Rahman, managing director and Europe practice head at Eurasia Group, in a note on Sunday.

However, the "the EU is likely to see the Single Market and Customs Union membership as binary choices [and] in the coming weeks, the Union will also be adopting more 'principles' to govern its approach," Rahman added.

He explained that it would be wishful thinking on the U.K.'s part to believe that it would have more flexibility with the EU after French and German elections are over this year.

Christian Noyer, special envoy to defend the financial interest of France in the Brexit negotiations, reaffirmed the European Union's hard stance on Brexit negotiations in an interview with CNBC at the Asian Financial Forum in Hong Kong.

"The U.K. leaving the European Union means they leave the single market, and there's no way you can access the single market… so it will be a third country like any other," said Noyer, who is also the Honorary Governor at Banque de France.

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