Investing.com - Sterling fell to two-month lows against the dollar on Tuesday as the prospect of Britain triggering its exit from the European Union and a second Scottish independence referendum weighed.
GBP/USD hit lows of 1.2109, the weakest level since January 17 and was at 1.2131 by 11.01 GMT, off 0.7% for the day.
The drop in the pound came after parliament gave its approval to Prime Minister Theresa May’s Brexit bill, giving her the power to formally trigger article 50 of the Lisbon Treaty to launch divorce proceedings with the EU.
Sterling was also hit by Scotland’s push for a new independence referendum, which deepened political uncertainty over Brexit.
The pound was also lower against the euro, with EUR/GBP advancing 0.58% to 0.8768, not far from Monday’s eight-week highs of 0.8786.
The euro pared back some gains after data showing that German investor morale improved only slightly in March as uncertainty over the outcome of major European elections remained high.
The ZEW Centre for Economic Research said that its index of German economic sentiment rose by 2.4 points to 12.8 this month, falling slightly short of economists’ expectations for a reading of 13.1.
Demand for the dollar continued to be underpinned ahead of an expected interest rate hike by the Federal Reserve at the outcome of its two-day policy meeting on Wednesday.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.22% to 101.48, building on the previous sessions modest gains.
Futures traders are pricing in around a 93% chance of a hike, according to Investing.com’s Fed Rate Monitor Tool.
With a rate hike seen as a near certainty investors were awaiting fresh cues from the Fed on the expected pace of rate hikes this year.