By Victor Reklaitis, MarketWatch , Suryatapa Bhattacharya

U.K. letter of notification has been signed and delivered

The British pound on Wednesday recovered somewhat from the prior day's selloff as the U.K. formally started the process of leaving the European Union.

The pound was changing hands at $1.2468, up slightly from $1.2456 late Tuesday in New York.

Earlier, the British currency had slipped as much as 0.5% to $1.2385, its lowest intraday level versus the greenback since March 21, but it then recovered.

The pound is now roughly unchanged for the week, and it's up by about 1% against the dollar in 2017 to date. It's down about 17% versus the buck since Britons voted on June 23 to leave the EU.

Meanwhile, the ICE U.S. Dollar Index was up 0.1% on Wednesday to 99.81, building a little on the prior day's 0.6% advance (http://www.marketwatch.com/story/dollar-rebounds-in-step-with-stocks-attempt-to-halt-skid-2017-03-28) that came after upbeat U.S. economic data.

The U.K. government letter formally starting the Brexit process has been received by Donald Tusk (Sterling%20had%20been%20under%20pressure%20late%20Tuesday%20in%20New%20York,%20falling%20as%20much%20as%200.9%%20to%20$1.2450%20versus%20the%20dollar.%20The%20pound%20weakened%20as%20the%20Scottish%20parliament%20voted%20to%20hold%20a%20second%20independence%20referendum,%20granting%20first%20minister%20Nicola%20Sturgeon%20the%20authority%20to%20negotiate%20with%20Westminster%20on%20holding%20another%20vote.), president of the European Council, kicking off two years of negotiations. The letter, which invokes Article 50 of the Lisbon Treaty, formally states the U.K.'s intention to withdraw from the European Union. It was handed over at lunchtime Wednesday in Brussels after being signed by British Prime Minister Theresa May the day before.

"The actual event is not necessarily the risk, but it's the surrounding commentary," said Bart Wakabayashi, Tokyo branch manager for State Street Bank and Trust.

Read:How to trade the pound as Theresa May pulls Brexit trigger (http://www.marketwatch.com/story/avoid-being-short-with-the-crowd-how-to-trade-the-pound-as-may-pulls-brexit-trigger-2017-03-28)

There is a consensus among market participants that the two sides -- Britain and the EU -- will get the concessions they are seeking, but the concern is the process, Wakabayashi said.

"There is no shock factor here, but they are starting from such different points that there is a risk of hiccups," he added. "They are going to be discussing completely different points of view and that's where the [market] volatility is coming from," Wakabayashi said.

Read:New GBP1 coin has a secret feature -- and everyone is baffled by it (http://www.marketwatch.com/story/new-1-coin-has-a-secret-feature-and-everyone-is-baffled-by-it-2017-03-28)

Sterling had been under pressure late Tuesday in New York, falling as much as 0.9% to $1.2450 versus the dollar. The pound weakened as the Scottish parliament voted to hold a second independence referendum, granting first minister Nicola Sturgeon the authority to negotiate with Westminster on holding another vote.

The recent pressure on the pound also has stemmed from the dollar's rebound as investors refocus on the strength of the U.S. economy.

"We believe that the dollar recovery will be more important for the pound in the coming days," said Kathleen Brooks, research director at City Index, in a note.

"The dollar index jumped by more than 0.5% and U.S. stock markets closed higher for the first time in four days on Tuesday, led by financials, a sector closely aligned with Mr. Trump's success," she said. That suggests "investors are willing to trust Trump again, as his policy team switch to tax reform after their failure to get their health care bill passed."

On Tuesday, the Conference Board's consumer confidence index surged in March to its highest level in 16 years. S&P CoreLogic Case-Shiller Indices showed home prices in January rose at their fastest rate since mid-2014.

Adding some flows back into the dollar and calming markets a bit was U.S. data combined with market expectations that the European Central Bank may continue to discuss easing its monetary policy, said Koji Fukaya, chief executive of FPG Securities in Tokyo.

"Market participants are relieved on the economic front, but some geopolitical risk in Europe remains," Fukaya said.

(END) Dow Jones Newswires

March 29, 2017 07:55 ET (11:55 GMT)

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