Sterling slipped this morning the British parliament's moved to wrest control of the Brexit process for a day.
The move has raised expectations that politicians can end an impasse on Britain's European Union exit, but it also raised the chances of a snap election.
Parliament will now vote tomorrow on a range of Brexit options, giving it a chance to indicate whether it can agree on a deal with closer ties to Brussels – and then try to push the government in that direction.
However, Prime Minister Theresa May has stressed she will not implement any proposal counter to her pledge to a clean break with the EU.
That means she could call an election, a prospect backed also by the opposition Labour.
If Britain cannot outline a plan by April 12, it must leave the European Union by May 22 with or without a deal, according to the terms of an extension granted recently by the bloc.
The pound traded at $1.3180, down 0.14% on the day, having risen to $1.3224 after yesterday's parliament vote. Against the euro it was flat at 85.80 pence.
Analysts said the rising risk of a general election and a no-deal Brexit remain potential banana skins for the pound in the near-term. They added that pound volatility will remain elevated.