Sterling fell almost 1% today as concerns grew that British Prime Minister Theresa May's offer to resign failed to convince hardline eurosceptics in her party to back her Brexit withdrawal deal.
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 today.
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.
The pound tumbled by close to 1% to $1.3061 this evening. Against the euro, it weakened 0.9% to 85.99 pence.
British politicians' effort to agree an alternative plan in a series of "indicative votes" fell short last night, leaving the Brexit process as deadlocked as ever.
"The upshot yesterday meant 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 in sterling has risen by a quarter and the spread between the one-month and one-year maturities has reached its widest point since the British referendum vote in June 2016.