The pound could surge this year as Brexit uncertainty clears up and lifts pressure of the currency, Luke Hickmore, a senior investment manager at Aberdeen Standard Investment said. 

Speaking to Bloomberg, he said: “I think actually we’ve had a lot of shorts cleared in the last couple of days.

“I think sterling is structurally too cheap.

“If we were just looking at nothing going on over the next couple of years, it should be a lot higher than it is at the moment so Brexit suppressed sterling. 

Hickmore added that Brexit trade negotiations could weigh on the pound. 

He said: “The risk is we continue to go through March’s negotiations and it weighs on sterling.

“I mean the stories overnight about the EU getting tougher, I would have expected that to combine a little bit today.”

In a note on Monday, ING FX strategist, Viraj Patel said: “Judging by GBP's rally since late November, which has continued in the first few weeks of the new year, a reassessment of the Brexit political games looks to be underway.

“But we feel there is more upside to come – especially if a transition deal were to be signed, sealed and delivered in 1Q18.”

In terms of euro to pound Patel wrote: “Stability is the name of the game for EUR/GBP, given that we have two positive cyclical stories offsetting each other in the near-term - with the broad 0.85-0.90 likely to remain in tact over 1H18.”

The pound was little changed against the euro at 1.1249 at 12:17 in London. 

Sterling fell 0.28 percent against the dollar to 1.3756 at 12:18 in London.