Sterling falls to three week low as Brexit nerves build
The British currency fell against the dollar on Tuesday to a new three-week low, as doubts grow about whether Prime Minister Theresa May can convince the European Union to accept changes to her Brexit divorce deal.
Time is running out for May to get the EU to amend the Brexit deal, and then get British lawmakers to back the agreement, before Britain is scheduled to leave the EU on March 29.
That has heightened fears among financial investors of a no-deal and disorderly Brexit even if the majority of British lawmakers want to avoid one, reversing a recent recovery in sterling.
May is expected to tell British lawmakers on Tuesday to hold their nerve over Brexit to force the EU to accept changes to the divorce deal.
She is expected to seek parliamentary backing again for her withdrawal arrangement with Brussels by the end of February after losing an earlier bid badly.
Investors want certainty, with the political turmoil weighing on consumer and business sentiment.
"Further delay is unlikely to be welcomed by business, however the Prime Minister appears determined to push her deal to the wire, given the lack of a parliamentary majority for any other options," said Michael Hewson, analyst at CMC Markets.
"This continued brinkmanship has seen the pound slip to a three week low against the US dollar."
The pound fell 0.2pc to $1.2833, its weakest since January 21.
Versus a broadly weaker euro, sterling held its own and was unchanged on the day at 87.695 pence per euro.
Britain's economy is also suffering from Brexit-related uncertainty - the UK economy last year grew at its slowest since 2012 with momentum sharply worsening in the final three months, data showed.
"It is difficult to determine exactly how much of this is related to UK politics and how much is a function of the slowdown elsewhere," Rabobank analysts said in a note.
"That said, it is very difficult to argue with the notion that Brexit related uncertainty has now had a significant economic impact."