Sterling steadied near two-week lows against the dollar and euro as fears of a second wave of coronavirus hit risk sentiment and global markets.
Investors were also nervous ahead of a key meeting on Brexit negotiations.
A fresh coronavirus outbreak in China and rising infection numbers in the United States - even as major economies have begun lifting lockdowns - put financial markets on the backfoot at the start of the week, with selling of stocks and risk currencies across the board.
The pound also took a beating, falling for a third straight session.
"The pound remains highly sensitive to changes in the external risk environment and is likely to continue trading on a corrective path lower, in line with cross-asset markets," Viraj Patel, FX and global macro strategist at Arkera said.
"The curveball provided by intensified Brexit talks today is unlikely to offset the gloomy outlook. However, we expect the pound to remain sensitive to any headline Brexit risks over the coming weeks."
Leaders from Britain and the European Union agreed today that talks on their future relationship should be stepped up to clinch a deal, with Prime Minister Boris Johnson suggesting an agreement could be reached in July with "a bit of oomph".
Earlier, after a video conference between Johnson, European Commission President Ursula von der Leyen and the leaders of the European Council and European Parliament, the two sides said they "agreed ... that new momentum was required".
With a status-quo transition deal set to run out at the end of the year, Britain is seeking a free trade agreement with the EU, which it left on January 31st, but negotiators have so far made little progress.
Investors will also look ahead this week to the Bank of England's meeting on Thursday, where it is expected to announce a fresh increase of at least £100 billion in its bond-buying firepower.
Bank of England Governor Andrew Bailey said the British central bank had to be ready to do more to help the country's economy because of the risk of long-term damage caused by the coronavirus shutdown.