Sterling dipped below $1.26 for the first time in more than two months on Wednesday, deepening this week's losses on signs that the prime minister, Theresa May, is still struggling to find the support she needs for her government in parliament.
Hit by a retreat in the chances of a rise in interest rates after comments by Bank of England governor Mark Carney on Tuesday, the pound fell another 0.2 per cent in early London trade, to $1.2592.
It also weakened 0.3 per cent to 88.40 pence per euro as officials said Ms May would not seal a deal with Northern Irish Unionists (DUP) before the new parliament is launched by the queen’s speech on Wednesday.
“Governor Carney’s Mansion House speech killed any wind that was in sterling’s sails yesterday,” Societe Generale strategist Kit Juckes wrote in a morning note to clients.
“The Conservative Party’s lack of progress in reaching a deal with the DUP won’t help sterling either.”