(Recasts, adds new quotes, details)
By Jemima Kelly
LONDON Jan 12 Sterling slipped on Thursday
after a spokeswoman said British Prime Minister Theresa May will
give a speech next week on her plans for leaving the European
Union, which sparked fears that she would suggest Britain will
undergo a "hard Brexit".
Sterling skidded to its lowest levels for almost 32 years
-excluding a "flash crash" in October - this week, after May
said over the weekend that Britain would not keep "bits" of EU
membership when it leaves the bloc.
Investors interpreted this to mean Britain would lose access
to the lucrative European single market in order to give
priority to reasserting full control of its borders to curb
immigration. This scenario has come to be known as "hard Brexit"
- a phrase that May herself rejects.
The pound had rebounded to as high as $1.2317
earlier on Thursday against a dollar weakened by a lack of
detail on President-elect Donald Trump's spending plans in his
first news conference since his election on Wednesday.
But after the news of May's speech, it slid backwards to
trade at $1.2207, slightly lower on the day though well clear of
Wednesday's low of $1.2038.
Against a broadly stronger euro, sterling fell 0.9 percent
to its weakest in almost two weeks, at 87.34 pence.
"If you were to look back at recent performances, it's rare
that she's said anything that's been taken positively, so the
risk - if you had to go one way or another - is that she again
pushes the market in the direction of a relatively hard exit,
which is not a positive for the currency," said RBC Capital
Markets currency strategist Adam Cole.
Traders are also awaiting a decision - expected in the
coming days - from Britain's Supreme Court on whether to uphold
a High Court ruling last year that said May's government needed
parliamentary approval before triggering "Article 50", which
will formally kick off Brexit negotiations with Brussels.
Investors reckon that if lawmakers from across the political
spectrum - a majority of whom backed staying in the EU in June's
referendum - are involved in activating Article 50, they will
push for a "softer" Brexit, which would be sterling-positive.
A further boost to sterling could come if Britain is forced
to delay its exit talks because of a potential suspension of
Northern Ireland's regional assembly - which a lawyer said on
Wednesday was a possibility. The resignation of Northern Ireland
Deputy First Minister Martin McGuinness on Monday effectively
collapsed the devolved government.
"If the Supreme Court were to both affirm the High Court
decision and also ruled that the government had to obtain the
approval of devolved legislatures, that's even more positive for
sterling. But the noise we're hearing is that that's probably
not going to happen," said Tan.
Bank of England Governor Mark Carney said on Wednesday that
the immediate risks from Brexit had fallen, and that the central
bank may now raise its forecasts for the UK economy.
(Reporting by Jemima Kelly; editing by Mark Heinrich)