Sterling slid sharply for a second day running on Tuesday, hitting two-month lows against both the dollar and euro as worries about Britain's plans to leave the European Union kept the currency under heavy pressure. Early trading saw the pound add to more than 1 percent losses suffered the previous day, down 0.5 percent to 87.38 pence per euro and hitting as low as $1.2107 on the dollar.
"The market is just piling in to sterling shorts following Theresa May's comments and given that we are expected to get a pick up in Brexit noise with the UK Supreme Court ruling," said ING FX strategist Viraj Patel "We could even get a test of the $1.20 level in the next couple of weeks," he added, saying he didn't expect the court judgement to alter the likelihood of Brexit happening.
Sterling has fallen 19 percent against the dollar since Britons voted to leave the EU on June 23 and around 12 percent against the euro, which has itself been vulnerable to political uncertainty. Prime Minister May added to worries over the weekend about a so-called 'hard Brexit' where immigration control is put above retaining access to the EU's lucrative single market, saying she was not interested in Britain keeping "bits" of its EU membership.
Another risk also playing into sterling's weakness, strategists add, is that of Scotland calling another referendum on independence. The head of Scotland's secessionist government said last week it could suspend its drive to become independent if Britain avoids a "hard Brexit" and stays in European Union's single market.