Sterling sank to a one-week low on Thursday as the prospects for a swift agreement on Brexit faded with the British parliament failing to agree on a way forward. The pound struggled against a resurgent dollar and took another leg down after a British government source said that a so-called "meaningful" vote in parliament on May's twice-defeated deal would not take place on Friday. Instead, a parliamentary debate on Brexit will take place.
The currency fell more than 1 percent as concerns grew that May's offer on Wednesday to resign had failed to convince hardline eurosceptics in her party to back her withdrawal deal.
May's prospects for getting her deal through - and indeed for surviving as prime minister - are worsening and investors see little chance of the impasse being broken soon.
Former foreign minister Boris Johnson, who led the 2016 referendum campaign to leave the European Union, said May's deal - already defeated twice in parliament - is now dead, London's Evening Standard newspaper reported on Thursday.
Another Conservative Party lawmaker, Mark Francois, denounced May's EU divorce deal as "rancid" and said he would reject it again if parliament voted on it again.
"Boris Johnson's comment one day after the DUP said it would not support the deal, has added to the already bearish sentiment on the pound," said Kenneth Broux, a currency strategist at Societe Generale in London.
The Democratic Unionists (DUP) are the Northern Irish party that props up May's minority government.
The pound tumbled more than 1 percent to a one-week low of $1.3035 on Thursday. Against the euro, it weakened 1.2 percent to 86.06 pence, a four-day low..
British lawmakers' failed to agree on an alternative plan in a series of "indicative votes" on Wednesday.
"The stalemate over Brexit continues as parliament is indicating clearly what it doesn't
want, but no clarity on what it wants," said Lee Hardman, a currency strategist at MUFG in London.
In a sign of how nervous the currency markets have become, expectations of how much the pound will move in the coming weeks have climbed faster than bets on how volatile the pound will be over a year.
One-month implied volatility GBP1MO= in sterling has risen by a quarter to nearly 13 vol, and the spread between the one-month and one-year maturities has reached its widest point since the British referendum vote in June 2016.