The pound edged lower on Monday (20 March), following the confirmation Theresa May will trigger Article 50 next week to formally begin the process of taking Britain out of the European Union.

Sterling had hit a three-week high against the dollar ahead of the announcement, climbing as high as $1.2412, boosted by the prospect of rising inflation and hawkish comments from some Bank of England's (BoE) economists.

However, it then slipped back, following news the UK government will invoke Article 50 of the Lisbon Treaty and trigger Brexit talks on 29 March.

By early afternoon, the UK currency was largely flat against the dollar, trading at $1.2389 and 0.20% lower against the euro, fetching €1.1521.

"While the timing of the triggering of Article 50 comes as no surprise given that May had previously vowed to do so before the end of March, it does show that sterling remains sensitive to Brexit related headlines, even those that are already widely known," said Oanda's senior analyst Craig Erlam.

"While the drop off in the pound isn't too severe, it was enough to take it into negative territory for the day. It also acts as a reminder that the next two years will likely continue to be volatile for the UK currency."

Once Britain triggers Article 50, a reply from the other 27 EU states is expected in around 48 hours after the UK's notification, before EU leaders will later hold a summit in April or May to decide a final response.

Neil Wilson, analyst at ETX Capital, added the stark reality of exiting the EU was hitting home.

"It's fascinating that the pound sunk quite so quickly as we knew the end of March was the preferred date," he said.

"Quite what has changed is hard to say except a hard dose of grim reality.

"We're now in for a long period of volatility for the pound and UK assets as the government embarks on protracted and hugely challenging Brexit negotiations."

Elsewhere, the dollar was broadly flat against the majority of its rivals, with the exception of the Swiss Franc and the Australian dollar, falling 0.16% and 0.41% respectively to CHF0.9996, and AUD$1.2949.

"Although sellers have exploited the disappointment from the Federal Reserve's less than hawkish stance to attack the Dollar Index repeatedly, the downside may be limited as sentiment improves towards the US economy," said FXTM research analyst Lukman Otunuga.

"Investors may pay extra attention to the string of speeches from Fed officials this week which could offer further clarity on interest rate hike timings this year."