Investing.com - The pound rebounded against the broadly weaker dollar on Tuesday as investors braced for a key speech by U.K. Prime Minister Theresa May, where she is expected to outline plans for Britain’s exit from the European Union.
GBP/USD climbed 0.64% to 1.2126, rebounding from the low of 1.1985 hit on Monday, which was the weakest level since October’s flash crash.
Investors fear that May will outline plans for the U.K. to leave the single market and the customs union in order to prioritize immigration controls and bilateral trade deals in a so-called "hard Brexit".
The prime minister has indicated that she intends to trigger in March the formal process to withdraw from the EU, but has yet to spell out details of the governments negotiating strategy.
A spokeswoman for the prime minister said Monday that reports that she will unveil plans for a "hard Brexit” in the speech are "speculation".
But advance extracts of the speech, released by May’s office, said Britain will not seek a Brexit deal that leaves it "half in, half out" of the EU.
Investors were also looking ahead to U.K. inflation data for December, due out later in the day.
Sterling was little changed against the euro, with EUR/GBP at 0.8796, holding below Monday’s 10-week highs of 0.8851.
The euro pushed higher against the dollar, with EUR/USD advancing 0.55% to 1.0659.
The dollar fell to fresh five-week lows against the safe-haven yen, with USD/JPY down 0.83% to 113.24 as investors looked ahead to U.S. President-elect Donald Trump's inauguration on Friday amid a lack of clarity on his economic policies.
Uncertainty over the incoming Trump administration’s plans for fiscal stimulus, deregulation and tax cuts, as well as concerns over Brexit continued to dominate market sentiment.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.58% to 100.94.