Rising fears that the UK is heading for a so-called hard Brexit has driven the pound to five-week lows against the euro.
Sterling dropped to its lowest level since 16 August against the euro, and also slid against the dollar.
The government's stance on Brexit has appeared to be hardening recent, sparking fears in the City.
International trade secretary Liam Fox has advocated a push for the UK to becomes an independent member of the World Trade Organisation (WTO) while, foreign secretary Boris Johnson said last week that Article 50 will be triggered “probably in the early part of next year”.
The government has so far refused to detail what sort of trade deal leaving the EU could lead to, and the Prime Minister Theresa May has said she will not provide a “running commentary” on her preparations for negotiations.
“The recent news reports that a so-called hard Brexit seems the more likely strategy for the UK’s EU departure and this has had a dramatic impact on the pound, with sterling falling to a five-week low,” said Paresh Davdra, chief executive at RationalFX, in a note to clients.