GETTY The pound has strenthened ahead of Article 50 being triggered

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Sterling was up by 0.65 per cent against the single currency to €1.13, and also weakened against the dollar to $1.21, wiping gains made on Monday. The UK's two years of negotiations could start as early as Tuesday after the Brexit bill cleared parliament. Critics predicted the start of Britain's formal exit out of the bloc could hit the pound. The imminent move by the Prime Minister was intially shrugged off by markets, before hitting sterling early on Tuesday.

Bloomberg The pound lost ground against the euro in Tuesday

Bloomberg The pound jumped against the euro on Monday before Tuesday's losses

The currency weakened significantly following last year's referendum vote and subsequent interest rate cut by the Bank of England. Threats of a second Scottish referendum have more recently added to the uncertainty, to keep Britain's exchange rate under pressure. But if the UK economy continues its strong performance, sterling could gradually start to rise. Rising inflation could also mean the Bank of England decides to raise interest rates earlier than expected, helping to boost the pound.

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Naeem Aslam, chief market analyst at Think Markets, said: "Sterling has dropped like a rock and all the gains which we experienced yesterday are wiped off.



"Traders have finally woken up to the reality… if Theresa May triggers the article 50 as per plan, it will have negative impact on the currency.



"The reason is that this spells only one thing for investors that she is heading towards hard Brexit negotiations with an attitude that she has nothing to lose.



"The biggest fear on the street is what will her EU partners will say and how they are going to treat this matter given that Brexit is about to become a reality."