The pound was not very lower against the dollar and the euro on Tuesday as the rate increase weighted on sentiment, as fading rate increase expectations weighed on sentiment.
After the Bank of England leaved interest rates unchanged last week, sterling fell sharply.
According to the National Institute of Economic and Social Research NIESR, Britain's economy risks to be sticky in the next few years due to supply chain bottlenecks and headwinds from Brexit.
ING analysts expect more subdued trading in Thursday's release of UK 3 Q GDP data. The speculative community did not have enough conviction for driving it below the September support levels, but they predicted a broad range of $1.34 - 1.38 will last into year-end. The pound fell by 1500 GMT to 85.59 pence against the euro.
It was down 1% against the dollar after a $1.3425 five-week low on Friday.
Uni credit analysts said the sterling needs to break beyond 1.36 against the dollar in order to convince markets to return long ahead of the mid December BoE meeting. Markets think they had an 50% probability of a rate increase in December, while before the BoE meeting, they had priced two rate hikes by year-end.
The strength of their dovish tone was the reason for us to be surprised by the BoE last week. BofA analysts said that it was not only that they didn't hike, but they were dovish about future hikes.
The proprietary BoE mood indicator, based on natural language processing of BoE minutes, and which we update here, backs up our subjective impression. It went back to the least hawkish since May. There was a lot of pressure on the pound as a result of new spats with Ireland and France about the post-Brexit trade deal.
British Minister of Brexit David Frost and French European Affairs Minister Clement Beaune spoke on Tuesday about fishing and post-Brexit trade and agreed to talk again this week.
Ireland said on Sunday that the British government appears to invoke unilateral emergency provisions in its Brexit deal governing Northern Ireland's trading arrangements.