LONDON: Sterling hit its lowest level since a January flash crash on Wednesday as Prime Minister Theresa May's last-ditch Brexit plan failed to win over either opposition lawmakers or many in her own party.
The pound fell 0.3pc to $1.2663, its lowest since mid-January, and weakened a quarter of a percent to 88.10 pence against the euro.
"The action from Labour and eurosceptic Tory members were quite negative and an updated deal passing parliament looks quite distant now," said Nomura FX strategist Yujiro Goto.
"It may depend on the result of the EU parliamentary election over the weekend, but this could mean May resigns over the weekend. It was generally expected by the market, but it became clearer yesterday."
The EU parliamentary election is due to run from Thursday to Sunday, and opinion polls suggest Nigel Farage's Brexit Party will poll strongly, leaving May's Conservatives in fourth place.
"Personally, I suggest chances of no-deal (Brexit) is nearer 50pc given the way things are shaping up right now.
Looking for lower sterling-dollar trend to continue into the EU election and beyond," said Neil Jones, head of hedge fund currency sales at Mizuho.
UK inflation data is due out later on Wednesday with a Reuters poll suggesting consumer prices would have increased 2.2pc in the month of April.
Yet, with politics dominating currency trading so heavily, any reaction to the data is likely to be short-lived, said Goto of Nomura.
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