The pound held onto gains against the U.S. dollar amid increasing signals from officials on both side of the country's negotiations with the European Union that suggest a softening of the British government's 'Hard Brexit' stance as it prepares its formal exit from the bloc.
Prime Minister Theresa May will send a letter to officials in Brussels Wednesday that will trigger the so-called Article 50 clause of the Treaty of Lisbon that begins the process of a member state leaving the European Union. The letter effectively kick-starts what could be years of negotiations on trade, tariffs, immigration, security and reparations after more than four decades of co-operation between the two governments.
However, despite an earlier insistence from May in her keynote Lancaster House speech in January that "no deal is better than a bad deal", reports from various media groups in both the U.K. and Europe suggest she and her Conservative party colleagues could be willing to adjust their stance on single market access and immigration when the talks commence.
The pound has traded at around 1.2565 against the U.S. dollar for much of the morning session, after rising to an 8-week high 1.2615 in Tuesday trading. In fact, the currency has been extending gains since March 16, when minutes from the Bank of England's last policy meeting showed that one of the nine members on its rate setting committee -- Kristin Forbes -- voted for an increase in the Bank's key lending rate and others indicated support for tighter monetary policy.
"With inflation rising sharply, and only mixed evidence on slowing activity domestically, some members noted that would take relatively little further upside news on the prospects for activity or inflation for them to consider that a more immediate reduction in policy support might be warranted," the Bank said.
Open Britain, a lobby group backed by former Deputy Prime Minister Nick Clegg, issued a statement Tuesday that urged the government to fulfil the promises made during last year's emotional Brexit referendum, which was ultimately decided by a slim majority of voters.
"Vote Leave and the government have made specific promises: leaving is a cost-free option; trade will be enhanced not hampered; there will be major savings from the EU budget; core arrangements with the EU, for example over national security, will remain unchanged; and the integrity of the United Kingdom will be protected," the statement said "Now that article 50 is being triggered, people will expect these promises to be delivered: this is the government's Brexit contract with the British people."
May's top-ranking ally, Brexit Secretary David Davis, told the BBC earlier Tuesday that the government will impose a "sustainable" system of immigration after it leaves the EU, saying whatever replaces the current open borders approach will be "in the national interest".
"Which means that from time to time we will need more, from time to time we will need less," Davis said "That is how it will no doubt work and that will be in everybody's interests - the migrants and the citizens of the UK."