The currency fell as much as 0.9% against the dollar on Tuesday to $1.1957. That's the lowest level since a flash crash occurred in October 2016, according to FXTM, a currency broker. The slide followed a drop of about 1% on Monday.
The move comes as UK lawmakers return from their summer vacation to kick off a high-stakes week for Britain's future.
Lawmakers who want to prevent a messy exit from the European Union will attempt on Tuesday to take control of the parliamentary agenda so they can pass legislation outlawing a so-called "no deal" Brexit on October 31.
UK media reported on Monday that Prime Minister Boris Johnson's government could push for an October 14 election if lawmakers derail his strategy to deliver Brexit with or without a deal that protects trade.
"Recent developments have left sterling traders with little to be optimistic about," said Craig Erlam, senior market analyst at Oanda, a foreign exchange trading firm. He predicts more volatility ahead.
Uncertainty about Britain's future relationship with the European Union — its biggest trading partner — is already weighing heavily on the economy. UK manufacturing data indicated that the sector contracted further in August. Retail sales data for the month also disappointed.
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