Pound weakens as Theresa May says UK cannot hang on to

The pound has fallen to its lowest level against the US dollar for two months after remarks by Theresa May appeared to add to the likelihood of a "hard Brexit".

Sterling was down by a cent at just below $1.22 in overnight trading, its lowest level since 31 October.

It was also a cent lower against the euro at just under €1.16.

The decline follows comments by the Prime Minister in an interview with Sky News that Britain could not hang on to "bits of EU membership".

Mrs May also insisted that the UK would be "working to get the best possible deal in the trading relationship with the European Union".

But currency markets appeared to interpret the remarks as making it less likely that the UK could retain access to the single market after Brexit.

The pound plunged to its lowest level against the dollar since 1985 after Britain voted in June to leave the European Union.

It is now about 19% lower than its level just before the referendum result became clear.

The currency has been volatile since the vote as markets seize on any clues about the nature of Brexit.

Indications of a "hard" Brexit have tended to weaken the pound while suggestions that the UK could retain access to the European single market have bolstered it.

A fall in the pound is bad for UK holidaymakers buying foreign currencies and also puts upward pressure on inflation as imports become more expensive.

But it can benefit British exporters as overseas customers will find goods sold in sterling more competitively priced.