The pound has dropped to its lowest level of the year below $1.2660 in recent trade after reports that PM May’s key Brexit vote has been pulled. The move may have spared an embarrassing parliamentary defeat for the PM but it will no doubt see those calls for her to be replaced grow ever more vociferous. The negative reaction in the markets is more likely due to what it means for her position rather than the failure to win the vote - with even her staunchest supporters already highly skeptical as to whether the bill would pass - as it now seems increasingly likely that a long-touted leadership challenge will ensue.
May is now expected to make a late dash to Brussels in a frantic bid to renegotiate the deal but here position is no doubt becoming increasingly untenable. The frontrunners to replace May as PM such as Boris and Rees-Mogg are much more likely to push for a hard Brexit and this would no doubt be negative for the pound, at least in the near term.
There’s still no official confirmation on this with the latest reports indicate that the PM is set to make a statement to commons later this afternoon (3:30PM) title “exiting the European Union”.