British pound tumbles amid Brexit reports

British pound

The British pound struggled at 32-year lows against the dollar in Asia on Monday after reports said UK Prime Minister Theresa May was ready to take the country out of the European Union in a so-called “hard Brexit”.

The pound’s retreat came with losses on most Asian stock markets as investors nervously await Donald Trump’s inauguration speech on Friday, having been left disappointed at his lack of detail on economic policy at a news conference last week.

A number of Sunday newspapers in the UK said May was willing to pulling out of the single market, the European customs union and the European Court of Justice, in order to regain control of immigration.

The news sent sterling plunging to $1.1986, its lowest since October’s “flash crash” that sent it to $1.1841 — a level not seen since the start of 1985.

The unit later pared some of the losses to sit just above $1.20.

“The weekend reports were undoubtedly the factor that pushed the pound down,” said Nomura forex strategist Yoshitaka Suda. “Markets are watching what Britain does.”

The reports come as May prepares to give a speech Tuesday on the government’s strategy on leaving the EU.

The PM aims to launch two years of departure talks when she triggers the Article 50 exit process by the end of March, although a legal challenge is still pending before the country’s Supreme Court.

“The market is now positioning for some fairly punchy rhetoric from Theresa May and this idea of hard Brexit and a clean break from the single market seems increasingly likely,” Chris Weston, Melbourne-based chief market strategist at IG Ltd, told Bloomberg News.

“The prospect of volatility here is now very high.”

Regional stock markets were also under pressure as dealers look ahead to Trump’s inauguration Friday with uncertainty. World equities surged after his election win in November on bets his plans for big infrastructure spending and tax cuts would fire the world’s top economy, and in turn the global economy.