The pound has made back some ground against both the dollar and euro in volatile trading following its latest slide, on Tuesday, attributed to Brexit concerns.
Fears of a ‘hard’ Brexit have dominated the assault on the pound’s value, which has tumbled 6% since Theresa May signalled the UK would be leaving the single market to allow full control over immigration.
Sterling’s rise of almost 2% on Wednesday followed a sag to $1.20 the previous day.
In that session, the assault on the pound pushed money towards UK stocks instead, with the FTSE 100 reaching a record intraday high.
Analysts have warned the currency risks heading back to the 31-year lows of last Friday at $1.14.
But Morgan Stanley’s head of currency strategy, Hans Redeker, said: “After weeks of tough rhetoric pushing sterling into a trading environment closer to an emerging market currency, the Government may aim to stabilise markets, with its rhetoric and suggestions now possibly shifting in tone.
“However, there is a fine line to walk as May’s Conservative Party wants a clean split from Europe.
“In addition, giving in too much, even before Article 50 negotiations have started, shifts the negotiation advantage towards the EU.
Hence, the pound’s rebound should be limited and followed by a decline.