There was testimony from Bank of England MPC member Saunders that the bank could cut interest rates to just above zero, but not below this level. He also commented that further Sterling weakness would not be a surprise and that the bank could look past the inflation impact if the economy slowed sharply. The relatively dovish comments increased speculation that the currency could be sacrificed to underpin the growth outlook.
GBP/USD dipped to lows just below 1.2100 with EUR/GBP above 0.9100, but the currency rallied sharply in Asia from over-sold conditions.
Reports that Prime Minister May would allow a parliamentary vote on EU exit terms curbed speculation over a ‘hard Brexit and triggered short covering and high volatility will continue.