Sterling dropped half a percent on Tuesday as investors took advantage of an early surge to cut their positions ahead of what is expected to be a volatile week as British lawmakers debate Prime Minister Theresa May's Brexit withdrawal agreement.
British parliament is due to vote on the agreement on Jan. 15, and the run-up is likely to dominate trading of the British currency, with May set to lose the vote unless she can convince opponents within and outside her party to back her deal.
A stronger dollar also weighed on the British currency.
The pound traded as high as $1.2797 on Tuesday before edging down to $1.2720, half a percent lower on the day.
Against the euro, the pound was barely changed at 89.875 pence per euro.
Source : Reuters