Sterling traded cautiously, after slumping to a three-month low against the dollar, as investors wait to hear from U.K. Prime Minister Theresa May on her Brexit plans.
Fears of a "hard" Brexit from the European Union undermined the currency in Asia trading. However, May's spokeswoman said on Monday that talk of a "hard" Brexit is "speculation."
But currency traders are worried how sterling will react when May outlines her plans on Tuesday, with newspapers suggesting the prime minister will prioritise immigration controls and bilateral trade deals with Britain leaving the EU's single market and customs union.
"When May spoke in October and again on Jan 8 sterling fell. The comments from her spokesperson over the weekend saying, 'we are expecting a market correction' underlines the presumption within government of the currency trading fresh lows," Jeremy Stretch, head of G10 FX strategy at CIBC told CNBC via email.