Pound plunges three week low over Brexit uncertainty

The pound fell towards a three-week low on Friday ahead of a last-gasp attempt by British Prime Minister Theresa May to win backing from lawmakers for her Brexit deal. Parliament will vote on a stripped-down version of May's twice-defeated divorce deal on Friday. Even if May wins, another vote will be required for Britain to legally exit the EU and the uncertainty is dismaying investors.

Traders are sticking to the sidelines, creating a shortage of liquidity in the market that has exacerbated swings in the pound. Prominent critics, including Conservative hardliners and Northern Ireland's DUP, which props up May's government, have refused to back the deal, meaning May has little chance of winning parliament's support.

The pound was a touch lower at $1.3030, close to a three-week trough of $1.3004. It was flat against the euro at 86.13 pence. Sterling fell 1.1 per cent on Thursday to end the day at $1.3043 after a volatile session.

The pound is beholden to Brexit news and headed for its worst monthly decline since October. "UK activity data is holding up well, but Brexit risks continue to be the focus for markets. As such, the data can't add any conviction to market expectations that the [Bank of England] may follow up its latest rate increase soon," the bank's analysts said in a note.