The British pound spiked around 3 percent against the U.S. dollar on Tuesday, after Prime Minister Theresa May outlined her plan for a clean break between the United Kingdom and the European Union.
"The key take away was that any deal will need parliamentary approval which means it could get watered down, lessening the blow from a nasty divorce," said Peter Ng, senior FX trader at Silicon Valley Bank, in a note. "May said that she will try to get the best deal possible for the UK but is prepared to walk away from the single market if she doesn't get what she wants."
The pound had taken a beating heading into May's speech, having briefly broken below $1.20 on Sunday. Lukman Otunuga, research analyst at FXTM, said in a note that a "decisive breakout and daily close above $1.2350 could encourage a further incline higher towards the next relevant resistance level at $1.2500."
GBP/USD 5-day chartSource: FactSet