The pound declined sharply on Tuesday (15 November), after official data showed inflation in the UK unexpectedly declined in October and a leaked memo suggested the government has no overall plan for Brexit amid divisions within the cabinet over strategy.

Having climbed to a seven-week high against the euro last week, sterling was down 0.84% against the common currency, exchanging hands at €1.1530, and was 0.64% lower against the dollar, fetching $1.2405.

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The decline came after a memo leaked to The Times in which the government is described as lacking a clear strategy plan to negotiate its exit from the European Union, despite the fact Prime Minister Theresa May committed to triggering Article 50 and the formal start of Brexit talks by the end of March 2017.

"Although Downing Street has rejected the report's claims, it once again puts UK political risks under the spotlight as markets await clarification on the government's key aims in upcoming negotiations with the EU," said Chris Saint, senior analyst at Hargreaves Lansdown currency service.

Meanwhile, according to the Office for National Statistics, inflation in the UK fell from 1% in September to 0.9% in October, compared with analysts expectations for a 1.1% reading. However, analysts described the unexpected fall as a blip, as sterling weakness continues to raise the cost of inputs for UK businesses. The cost of raw materials and fuels bought by UK companies jumped at the highest monthly rate on record in October, with total input prices up 4.6% from September.

"Though the pound has fallen very sharply, it is taking some time for this to feed through into prices in the shops and online," said Andrew Sentance, senior economic adviser at PwC.

"But this respite for consumers will be short-lived. In the months ahead and next year, we should still see a significant increase in inflation reflecting higher import costs for manufacturers and retailers."

Elsewhere, the dollar's rally recorded a slight slowdown, which left the greenback marginally lower against some of its major rivals. The US currency was 0.13% and 0.15% lower against the yen and the Canadian dollar, fetching ¥108.28 and CAD$1.3537 respectively, and was broadly unchanged against the euro trading at 0.9306 euro cents.

Craig Erlam, senior market analyst at Oanda, said: "Given just how priced in a [interest rates] hike in December now is, it is possible that the move in the dollar is a little overextended and yet we're not seeing a too much appetite for a correction. The move we've seen today more so resembles profit taking than anything more substantial."

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