Markets generally unperturbed after UK activates Brexit talks with EU

"The UK markets began to flatten out as lunchtime approached, with investors undecided on how to react to the simultaneously momentous and uneventful triggering of Article 50," said Connor Campbell, financial analyst at Spreadex.

At 12:50 BST sterling was up 0.14% to 1.2468, having largely recovered from a sharp fall earlier in the morning. It was, up 0.42% to eur 1.1562. Safe-haven gold was down 0.35% to $1254.4 an ounce.

"These are very low level jitters, and may disappear once confirmation that the withdrawal clause has officially been enacted has been received," said Campbell.

The UK voted by a slim margin to quit the EU in June last year, prompting a hefty sell-off in sterling as traders and investors became accustomed to the new political landscape, and priced it into their positions.

This has resulted in a rise in inflation above Bank of England's targeted 2% rate, with expectations it would continue elevated for some time. However, some boon was enjoyed by stocks investors who saw -- in combination to the Trump effect -- the FTSE 100 zip higher.

Jasper Lawler, senior market analyst at London Capital Group, said the trouble with using Brexit uncertainty to explain the drop in the pound earlier on Wednesday was that the euro and yen also fell against the dollar.

"In essence, the drop in GBP/USD was mostly a dollar move on reignited hopes of Trump-led US stimulus than fears over Article 50," said Lawler in a note.

"Another knee-jerk plunge in sterling after Article 50 is triggered is clearly possible, but seems unlikely," added Lawler.

IG chief market analyst Chris Beauchamp was another market watcher who observed that, apart from some short-term gyrations in sterling, the impact of the Article 50 activation had been relatively small.

"The real impact will be in the response from the EU, both in the near-term and over the next few months as the bloc begins to put its negotiating position together in concrete fashion," cautioned Beauchamp.

He further noted that while stock markets had been a touch jittery, the "message of the week appears to be that dip buying is still very fashionable, even if the rationale behind it is hard to figure."

Meantime, Lawler continued that attentions would now be on what kind of divorce deal May and her team of negotiators managed to extract from the EU, whether 'soft,' 'hard,' or none at all.

"Economically it makes sense for the EU to negotiate a fair deal, but politically its agenda is very different," he said in a statement, commenting a no-deal outcome was the biggest threat as the EU sought to prevent other members following the Brexit model.

"In our view, it is entirely likely the UK comes away with no deal and trades based on WTO rules in two years' time," said Lawler, adding this would be a major test for sterling.

"We are confident in the UK’s long term ability to prosper outside of a trade deal with the EU, but recognise the uncertainty it would provide near term."