The pound began the week on an upbeat note, gaining ground against both the euro and the dollar as investors awaited Britain formally triggering Article 50 and looked ahead at the Federal Reserve meeting later in the week.
By lunchtime, sterling was up 0.39% against both the euro and the dollar, trading at €1.1445 and $1.2216 respectively. However, the UK currency remained below €1.1450, after breaching the threshold on Friday (10 March) for the first time since mid-January and recording an 11th consecutive daily decline in the process.
With Theresa May poised to formally begin Britain's exit process from the European Union as early as Tuesday (14 March), analysts expect the pound to endure more turmoil in the short-term.
"We reject the notion that sterling has fully priced Article 50 and beyond," analysts at Bank of America Merrill Lynch warned earlier this month.
"Risks to the currency remain to the downside on a disruptive start to negotiations."
Spreadex's financial analyst Connor Campbell echoed the thought. "It will be interesting to see how much the pound reacts to the news if [Article 50] is indeed activated on Tuesday.
"On one hand the currency knows it is coming; on the other, Britain is far from in the best place to begin negotiations."
Elsewhere, the dollar was on the back foot as investors drew breath ahead of the upcoming Federal Reserve meeting later this week.
The greenback was 0.32% and 0.21% lower against the Swiss Franc and the Canadian dollar respectively, trading at CHF1.0077 and CAD$1.3443. Broadly flat against the euro, the dollar was also down against its Australian counterpart and the yen, falling 0.43% and 0.22% respectively, to AUD$1.3200 and ¥114.54.
On Wednesday (15 March), the US central bank is widely expected to announce a second rate hike this year, after a series of economic data confirmed the world's largest economy remains in rude health.
However, investors could suffer an unexpected backlash should the Fed leave the markets wrong-footed by opting against hiking interest rates.
"The clearly co-ordinated effort to convince investors that a rate hike is firmly on the table, from a position in which it appeared out the question, has almost worked too well, with markets now almost fully pricing one in," said Oanda's senior analyst Craig Erlam.
"The risk is that the Fed now struggles to live up to expectations and should it for whatever reason delay raising interest rates, it may have unintentionally dramatically misguided investors which could result in significant volatility come Wednesday."