The pound has made back some ground against both the dollar and euro in volatile trading after reaching record lows on Tuesday thanks to uncertainty over Brexit.

Sterling was trading around $1.22 and just under €1.11 on Wednesday afternoon as investors reacted to the Government indicating it was prepared to offer MPs greater scrutiny of the process for leaving the European Union.

Sterling’s rise of more than 1% on Wednesday followed a sharp drop to $1.20 the previous day. Bank of England data has since shown that it had hit its lowest ever levels when measured against a basket of other international currencies.

The pound value reached as low as 73.383 on Tuesday in comparison to a group of 61 international economies, breaking previous rock-bottom records of 73.495 – registered in December 2008, when the UK was in the depths of recession caused by the financial crisis.

Fears of a hard Brexit have dominated the assault on the pound’s value, which has tumbled 6% since Theresa May signalled the UK would be leaving the single market to allow full control over immigration.

She told MPs in the Commons the Government would, nevertheless, be seeking maximum possible access.

In Tuesday’s session, the assault on the pound pushed money towards UK stocks instead, with the FTSE 100 reaching a record intraday high.

Values later came off the boil as the US earnings season got underway – with Alcoa’s results missing estimates and hitting wider market sentiment.

Analysts have warned the pound risks heading back to the 31-year lows of last Friday at $1.14. 

But Morgan Stanley’s head of currency strategy, Hans Redeker, said: After weeks of tough rhetoric pushing sterling into a trading environment closer to an emerging market currency, the Government may aim to stabilise markets, with its rhetoric and suggestions now possibly shifting in tone.

However, there is a fine line to walk as May’s Conservative Party wants a clean split from Europe.

In addition, giving in too much, even before Article 50 negotiations have started, shifts the negotiation advantage towards the EU.

Hence, the pound’s rebound should be limited and followed by a decline.

(c) Sky News 2016: Pound nudges up to $1.23 after Tuesday’s record lows