Sterling fell to its lowest value since mid-January ahead of the resumption of voting in the House of Lords on the government’s bill on Article 50.
The pound fell below $1.22 against the US dollar on Tuesday morning for the first time since 17 January, when Prime Minister Theresa May announced the UK would leave the EU’s Single Market.
The pound has become the lightning rod for investor angst over the Brexit process, with any sign of a more protracted or complicated process in general greeted with a fall in sterling.
The Lords is set to vote later today on an amendment to allow Parliament a “meaningful vote” on the deal the government negotiates with the EU, which raises the possibility, albeit distant, of MPs rejecting terms.
Peers have already defeated the government on one amendment, which says the UK must guarantee the rights of EU nationals already living in the country.
While the defeat for the government means MPs vote on the amendments in the House of Commons, the Conservative majority, bolstered by the Democratic Unionist party (DUP), means it will likely easily reject any changes to the short bill allowing the government to trigger Article 50.
Meanwhile, weakness in consumer spending reported by the British Retail Consortium may also have contributed to sterling’s fall.
Demand for non-food items fell for the first quarter since 2011, while even the boost to overall food sales may be a sign of higher prices, rather than increased consumer demand.
Inflation has started rising sharply, and is expected to breach the Bank of England’s two per cent target when February figures are released in a fortnight. This in turn may hit consumer demand, weakening the overall UK economy.