The pound struck new four-month lows yesterday after British MPs slammed Prime Minister Theresa May’s latest attempt to pass her Brexit plan.
In morning, London trade, sterling sank to $1.2662, the lowest point for four months, while the European single currency hit a three-month high at 88.14 pence.
Ms May has already failed three times to pass her controversial withdrawal agreement in Parliament, and has vowed to set out departure plans shortly after the next vote on her deal.
Asian and European stock markets meanwhile pushed upwards as dealers awaited the latest developments on the China-US trade war.
With Wall Street providing a positive lead, equities were mostly on the up but analysts warned traders were on edge and any unsavoury headlines could precipitate another sell-off.
Sterling had rallied Tuesday after Ms May unveiled her revised EU divorce deal that included a promise for lawmakers to set a confirmatory referendum on whatever version of Brexit they end up approving.
However, the currency fell as quickly as it had risen as opponents of the original agreement attacked it as nothing more than a rehash.
Ms May called the new proposals this parliament's “last chance” to end a political deadlock but with key MPs still unmoved, it is likely to fall flat for a fourth time.
Dealers are keeping a close eye on developments in the China-US trade tussle after the pair swapped tariff hikes and Donald Trump barred Chinese telecoms giant Huawei from the US market and put it on a sales blacklist.
A 90-day reprieve provided a semblance of hope that the row can be resolved and the two economic superpowers will hammer out a trade deal at some point.
But reports emerged that Trump is now considering banning Chinese surveillance camera makers from getting access to US components, in a similar move to that against to Huawei, which could further stoke tensions.
Attention is now on the release later in the day of the minutes from the Federal Reserve's most recent policy meeting, with hopes it will provide some idea about the state of the US economy.
Oil prices dipped after data pointed to a surprise increase in US inventories, while Washington appeared to tone down its rhetoric from recent weeks with Iran, saying it did not want a war with the Islamic republic.
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