The Pound Sterling (GBP) took a hit last week as expectations for Britain's exit from the European Union increased, coupled with fears that the U.K. would not be able to make a deal to retain single market access to the EU.

December USD/GBP futures contracts opened at 1.2178 against the greenback on the CME Globex, breaching 1.122 during mid-morning highs. December USD/EUR futures contracts opened at 1.099 against the buck and traded above 1.10 by mid-morning. Last week the Pound Sterling trailed lower until Wednesday when it regained some strength.

Signs of a softer Brexit appeared up over the weekend, as the Financial Times reported that the British government may continue to pay the EU for "passporting rights"--to the tune of billions of pounds--that would allow London firms to continue trading on the continent after March 2017, when the U.K.-EU divorce begins to take effect in earnest.

Meanwhile European Council President Donald Tusk said on Friday that a "hard Brexit" was the only option. An unidentified cabinet minister in Prime Minister Theresa May's government stated, "We have to be careful how we explain" a hard Brexit, since sympathies for a Brexit do-over ---and a softer Brexit--have increased. Conservative U.K. Euroskeptics want a hard exit from the EU and are more concerned with controlling immigration than with the care and feeding of the City and its financial services industry.

October saw the Pound Sterling falling against the Dollar as the reality of Brexit, which won by the thinnest of majorities, began to set in. Some stateside investors think view the dollar rally that has taken off at the pound's expense as a clue that a Fed rate increase is on the back burner.