"I think the shock of the flash crash and possibly the surprise that the pound is still trading below $1.23 has forced people to reassess their short and long term outlook over the last few days. Clearly the realistic prospect of a 'hard Brexit' was not being priced in and unless the rhetoric dramatically changes, I don't expect a major recovery in the pound now. That said, in the short term, I think further downside could be relatively low, with the pound perhaps finding a floor between 1.20 and 1.23 (against the dollar)."
"The longer term outlook will depend on one other remaining unknown, how the economy will fare in the coming quarters. The recent data appears to have lulled people into a false sense of security and so a downturn in the data, maybe a contraction in (the third quarter) or (the fourth quarter) could trigger another bout of weakness for sterling, possibly sending it back towards 1.15 (against the dollar). I think it will take something quite significant to take us back to 1.10, be it an unexpected recession or a breakdown in negotiations following the triggering of 'Article 50', although the latter could trigger even larger declines."