The pound hit its lowest level against the dollar in over three months on Monday (16 January), amid increasing speculation Theresa May will argue the case for a hard Brexit in a speech later this week.

Sterling fell to a three-month low of $1.1983 overnight after the Sunday Times reported the prime minister was prepared to pull Britain out of the single market, the lowest level since last October's flash crash. The pound then recouped some of the losses but failed to register any significant gains against its main rivals.

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By early afternoon, the UK currency was broadly unchanged against the dollar, trading at $1.2055, but fell 0.43% against the euro, buying €1.1380.

"Fears Theresa May will use tomorrow's speech to signal that the UK will take the 'hard Brexit' route and pull out of the EU single market have hit the pound hard today," said Chris Saint, senior analyst at Hargreaves Lansdown.

"Previous comments from Mrs May on her Brexit plans have tended to be negative for sterling and traders will be positioning themselves for potentially more of the same."

Lukman Otunuga, research analysts at FXTM, warned the situation could get even worse in the short-term future.

"With fears on the rise over a tougher Brexit negatively impacting the UK economy, the rising risk aversion, and diminishing buying sentiment may ensure sterling remains depressed this month," he predicted.

"While most anticipate Theresa May to provide some clarity on Tuesday on how the UK plans to move forward with the hard Brexit scenario, there is a threat of the sterling sinking deeper into the abyss if investors are left empty-handed instead."

Elsewhere, the euro fell against the dollar, losing 0.51% to trade at $1.0561, with the latter posting gains across most of its international rivals.

The greenback was 0.21% and 0.19% higher against the Canadian dollar and the Swiss franc respectively, fetching CAD$1.3141 and CHF1.0103 and gained 0.33% against its Australian counterpart, trading at AUD$1.3374.

The yen, however, proved to be a sterner test for the US currency, which declined 0.33% to ¥114.11.

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