Sterling has fallen below $1.27 for the first time since the beginning of the year as Brexit fears intensify.
It comes as Prime Minister Theresa May prepares to unveil her “new and improved” Brexit plan to her Cabinet this afternoon in a bid to pass a deal through parliament at the fourth time of asking.
Traders continued to sell off sterling this morning as it dropped 0.26 per cent to $1.269.
The currency has steadily declined since discussions between Labour and the Conservatives collapsed last week.
“The selling pressure on sterling shows no signs of abating, with the pound slipping to its weakest level since January this morning,” Neil Wilson, chief market analyst at Markets.com said.
Wilson said the two main drivers of the drop were Brexit fears and a strengthening dollar.
He added: “As far as Brexit goes it’s still as clear as mud and traders are de-risking from the pound.”
In April, EU leaders have granted an extension to Article 50 until 31 October.
But former UK ambassador to Brussels Sir Ivan Rogers warned last week that those same leaders may not grant a further delay if MPs continue to “squander” the current extension period, ramping up the threat of a no-deal scenario.
Sterling traders have long feared a no-deal Brexit, which the Bank of England has said could cause the pound to drop 25 per cent to parity with the US dollar.
David Cheetham, chief market analyst at Xtb, said: "What happens next is pretty much anyone’s guess but the main concern in the markets remains that the 6-month extension from the EU could well be as far as the bloc is willing to go without a clear change of tact from the UK.
"As things stand the default outcome in the absence of an extension would be a no-deal Brexit."
Chancellor Philip Hammond is set to add his own stark warning over the dangers of leaving the EU without a deal in a speech in the City tonight.
At the annual dinner of the Confederation of British Industry (CBI), Hammond will warn those in favour of leaving without a deal are advocating a deliberate act of harm on the economy.