The pound remained stuck near a one-week low on Wednesday as lack of progress in Brexit talks prompted concern that a vote on Prime Minister Theresa May's proposed deal could be delayed.
Talks between May's top government lawyer and European Union negotiators to win concessions from the EU on Brexit ended on Tuesday without agreement, and no breakthrough is expected before the weekend.
Britain is due to leave the EU in 23 days and sterling investors are on edge. The pound has dropped this week as doubts mount over how, or possibly even if, Britain's exit will take place.
A Reuters poll found that most economists thought Brexit would be delayed by a few months and the two sides will eventually agree a free-trade deal.
May has offered lawmakers a chance to seek to prevent a no-deal departure and to delay Brexit if parliament rejects her deal in a vote she has promised to hold by March 12.
"Even if a no-deal Brexit is taken off the agenda next week, the uncertainty of what would happen in case of a postponement remains. Pound traders cannot ignore this fact ... things remain tense for sterling," said Esther Maria Reichelt, an FX strategist at Commerzbank in Frankfurt.
At 1120 GMT the pound was down 0.3% at $1.3140, close to Tuesday's one-week low of $1.3097. It was also struggling against the euro, down 0.2% at 86.02 pence.
Traders are expecting big swings in the currency around the vote on March 12, according to a sharp rise in one-week implied volatility.
One-week implied volatility measures demand for options to hedge against big currency swings. A higher percentage reflects greater expectations of currency movements over the next seven days.
There was little obvious reaction in the pound to reports that Britain is considering dropping some tariffs in the event of a no-deal Brexit, "probably down to the fact that markets still consider it a remote possibility at this stage" said CMC Markets' Michael Hewson.
One of the best-performing major currencies so far in 2019, sterling rose last week as investors bet a no-deal Brexit would be avoided and Britain's EU exit delayed. (Reuters)