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Pound hits new 31-year low against dollar; near 3-year low against euro

There was more pain for the pound on Tuesday, with the U.K. currency hitting a fresh 31-year low against the greenback and a near 3-year low versus the euro.

Currency strategists, including a team at Swiss bank Julius Baer, are predicting more weakness for sterling as investors continue to fret over the U.K.'s split from the European Union.

"An intended more lavish BoE (Bank of England) policy going forward and lasting double deficits, i.e. of the current account and of the fiscal budget, are fundamental factors for further erosion of the British pound," Janwillem Acket, the chief economist at Julius Baer, said in a note Tuesday. The bank is predicting that sterling could reach parity with the euro in the next year.

Luke Macgregor | Reuters

The further dip in sterling on Tuesday, pushed it below below 1.30 against the U.S. dollar, came after weak data for the services industry in the U.K. and after a financial stability report by the Bank of England. The central bank has signaled that it could ease over the summer and some are suggesting more quantitative easing could be on the cards.

However, more money printing and aggressive easing is usually detrimental to currency prices and is likely to push the pound lower.

"Currency weakness will be tolerated (by the Bank of England) if not actively welcomed. Positioning will dictate the pace of the fall," Kit Juckes, global head of foreign exchange strategy at Societe Generale, said in a morning note.

The ruling Conservative party will hold the first stage of its selection process for a new leader on Tuesday evening and potential candidates have been busy putting their ideas forward for the post-Brexit environment. Meanwhile, investors have been spooked by two U.K. property funds which has been halted after a string of outflows.