Infographic: Hard Brexit rumour sends pound to three-month low against dollar

The pound slumped to its lowest point for more than three months

Before making a slight recovery on Monday, Sterling fell to below 1.20 dollars - its lowest point since October’s “flash crash”.

The drop comes ahead of the Prime Minister’s announcement on Tuesday regarding her approach to Brexit negotiations.

Various Sunday newspapers said Mrs May was heading towards a departure from the single market.

Sterling’s slump in the Asian markets also came after Chancellor Philip Hammond suggested ministers could slash corporation tax rates if Briton was frozen out of the single market.

Mr Hammond told a German newspaper that the Government would do “whatever we have to” to ensure UK businesses would stay competitive.

Downing Street would not be drawn on reports Mrs May would announce plans to withdraw from the single market and the European customs union during her speech at London’s Lancaster House.

But The Sunday Telegraph quoted a government source as saying: “She’s gone for the full works. People will know when she said ‘Brexit means Brexit’, she really meant it.”

Theresa May’s official spokeswoman made clear the Prime Minister backs the Chancellor’s comments to German newspaper Welt Am Sonntag, in which he indicated the UK wants to remain “in the mainstream of European economic and social thinking” but was ready to “change our economic model” if it was denied access to the single market.

The comment was widely interpreted that the UK could adopt a Singapore-style low-tax approach to attract business if it was frozen out of the single market.

The PM’s spokeswoman said: “She shares the view that the Chancellor set out that we want to remain in the mainstream of a recognisable European-style taxation system, but if we are forced to do something different because we can’t get the right deal, then we stand ready to do so.”

She added: “It is in the UK and EU’s best interests to do the right deal, a deal that benefits us all.”