FX round-up: Sterling sold lower ahead of Article 50 as S.Africa's rand dives

Sterling had a torrid time on key crosses Tuesday as a pall of pre-Brexit nerves again weighed on sentiment, although the British unit's downcast performance was well and truly outpaced by hefty falls in South Africa's already besieged rand.

At roughly 17:05 GMT, sterling was down down 0.5% to $1.2496, and down 0.37% to €1.1516. On both pairs it was some distance above the lows sparked after the Brexit referendum in 2016.

Prime Minister Theresa May is widely expected to activate Article 50 of the Lisbon Treat on Wednesday, opening the door to two years of divorce negotiations with the European Union, during which time sterling would likely be prone to volatility.

Sterling was also down firmly against the aussie, loonie, kiwi and yen. It and the dollar were strongly ahead on the rand due to speculation that Finance Minister Pravin Gordhan could be about to lose his job after being recalled to the country by President Jacob Zuma.

Returning to the UK currency, IG market analyst Joshua Mahony said that for FTSE bulls there was a feeling that Brexit worries could cause further sterling devaluation, helping out UK firms in the international marketplace.

"Amid all the potential leaks out of the (Brexit) negotiating room, sterling is also likely to take its lead from the corporate world, should we hear of substantial job losses," said Mahony, who was not the first to suggest information leakage during the two-year process.

Spreadex financial analyst Connor Campbell reckoned it would be interesting to see how sterling behaved on Wednesday.

"Article 50 isn't like a Fed meeting, where a surprise could be sprung," he observed.

"It is almost just a formality, if, admittedly, one that carries a rather nasty reminder about the years of volatility and insecurity investors can expect as the Brexit negotiations officially get underway," he continued.

ThinkMarkets UK chief market analyst Naeem Aslam said, referring to CFTC data, that sterling short positions were still at a record high, which meant the bias in the market was for more downside move.

Although several market insiders believe sterling to be undervalued, it appeared that concerns centred on the deal May might be able to achieve with the EU in what was obviously a prohibitive time frame.

Against this cut-and-thrust fabric, Scotland has this evening voted for a second referendum on independence. MSPs voted 69 to 59 in favour on seeking permission for a referendum before the UK quits the EU. May has repeatedly asserted that "now is not the time" for a referendum.

Finally, the US dollar plugged away to produce a mixed performance on Tuesday. It was up against the euro, kiwi and, as mentioned earlier, the rand, but down on the aussie, loonie and defensive-appealing yen.

"The US dollar has remained under pressure along with US treasury yields as doubts about future US fiscal policy conspire to keep traders cautious," said Michael Hewson, chief market analyst at CMC Markets UK.

"The Japanese yen and to a lesser extent the Swiss franc remains amongst the better performers on the back of lower US treasury yields and some limited risk aversion," he observed.