The pound kicked off the week before Christmas on a disappointing note, falling against its major rivals amid very thin trading, as markets paused ahead of the festive period.

By early afternoon, sterling was down 0.73% and 0.70% against the dollar and the euro respectively, exchanging hands at $1.2400 and €1.1882.

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The ongoing impasse surrounding the Brexit process has not helped the pound, while Nicola Sturgeon's comments over the weekend did little to improve the mood.

The Scottish First Minister warned Theresa May she will ask for a drastic overhaul in the devolution plan when she sets out the Scottish government's proposals to keep the country in the European single market.

Should the requests be dismissed, Sturgeon could push for a second independence referendum.

"The continued weakness of the pound highlights the fact that quite frankly no one has a clue where things will stand at the end of the Brexit negotiations, and Sturgeon's opportunistic approach
should ensure yet more anxiety as to the future of the UK," said Joshua Mahony, market analyst at IG.

Elsewhere, the dollar recovered some of the losses it recorded earlier in the session and was on the front foot against its main rivals, with the exception of the yen. The greenback was 0.36% higher against its Canadian counterpart, trading at CAD$1.3384, and rose 0.31% against the euro and 0.19% against the Swiss franc respectively, fetching 0.9602 euro cents and CHF1.0281.

However, the US currency was on the back foot against the yen, falling 0.68% to ¥117.13 ahead of the Bank of Japan's (BoJ) interest rates decision on Tuesday morning.

"The Japanese currency has been under severe pressure over the last couple of months since the BoJ made some tweaks to its bond-buying program that has made a big difference at a time when yields elsewhere are on the rise," said Oanda's senior market analyst Craig Erlam.

"With the Federal Reserve having raised rates and updated its outlook, the European Central Bank cut bond buying but extended the deadline and the Bank of England in wait and see mode, we could see the yen pare some of these substantial losses in the coming weeks."

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