The pound lost ground against its major rivals on Monday (7 November), as the US dollar rallied after the FBI said it found no evidence of criminality in a new batch of Hillary Clinton emails, boosting her campaign days before the US presidential election.
Sterling had climbed above $1.25 for the first time since early October on Friday, building on the momentum generated the previous day after the Bank of England revised its growth forecast for 2017 and the High Court ruled MPs will have to vote on whether to trigger Article 50.
However, the pound began the week on a disappointing note and by mid afternoon was down 0.70% against the dollar, exchanging hands at $1.2424. Meanwhile, the UK currency was largely unchanged against the euro, trading at €1.1228.
Naeem Aslam, chief market analyst at Think Markets UK, said the pound could reverse its losses and move higher over the next 24 hours. "Traders are focused in positioning themselves ahead of the US election," he said.
"Smart money is taking bullish positions on the euro/dollar pair. Similarly, traders have also cut the bearish bets for sterling and the sentiment is that sterling will move higher."
Across the Pond, the dollar rallied after Clinton was again installed as the firm favourite to replace Barack Obama at the White House, after the FBI ruling cleared her of any criminal wrongdoing. The US currency was 0.7% higher against the euro, exchanging hands at 0.9040 euro cents, and gained 0.14% and 0.24% against the yen and the Canadian dollar respectively, to trade at ¥104.34 and CAD$1.3393.
The greenback was firmly on the back foot last week after polls showed the race to the US presidency was too close to call, as Donald Trump looked to have close the gap between himself and Clinton.
FXTM analystLukman Otunuga, however, warned that even if the Democratic candidate does get elected, the dollar could still be subject of sharp fluctuations.
"Tuesday's pending presidential election could inject the dollar with extreme levels of volatility as investor's systematically offload and reload positions to be on the right side of the trade," he said.
"The dollar continues to be supportive of a Clinton victory [and] the latest reports from the FBI have propelled the dollar higher."