The pound began the week on the back foot, extending losses from the previous two weeks amid reports of a Cabinet split and higher yield on the 10-year gilt.
Having lost over 6% in the last two weeks after Prime Minister Theresa May floated the prospect of a "hard Brexit", sterling was down 0.48% against the euro, exchanging hands at €1.1047, and lost 0.30% against the dollar, trading at $1.2150.
The Times and The Telegraph reported a rift between Chancellor Philip Hammond and other cabinet ministers.
A row is alleged to have broken out during a Brexit cabinet committee meeting over Home Secretary Amber Rudd's plans to introduce work visas in a bid to reduce net migration to the UK. Hammond apparently urged caution over the proposal, provoking claims he was attempting to "undermine" Brexit.
According to reports, Hammond has previously sounded the alarm over Britain's departure from the single market as part of the Brexit process and he was accused of being "overly influenced by his Treasury officials who think it is a catastrophe that Britain voted to leave the EU".
However, Theresa May has "full confidence" in Hammond, Downing Street has said, after reports the chancellor was trying to slow progress towards Brexit. Some newspapers say colleagues believe Hammond is attempting to "undermine" the process by delaying decisions on migrant curbs.
Claims that Hammond could quit the Cabinet over escalating tensions were rubbished by Treasury sources, who called them "complete and utter nonsense." They added: "It is ridiculous to suggest he is doing anything other than trying to make [Brexit] work."
Chris Saint, senior analyst at Hargreaves Lansdown currency service, warned that while political uncertainty will continue to influence the pound, the British currency could also see swings triggered by the upcoming economic data.
"Although ongoing political considerations are likely to remain central to sterling's performance, we also have a busy domestic schedule on the economic front to look forward to," he explained. "A weaker pound is expected to feed into higher inflation via rising import costs in the coming months and tomorrow's inflation figures will be watched for signs this theme is starting to emerge."
Meanwhile, Thomson Reuters said sterling traded more than three times its daily average for the past three months against the dollar in the 24 hours following a dramatic 10% plunge on 7 October. Rising gilt yields compounded the pound's woes, as the 10-year UK gilt rose to 1.17%, trading near its highest since the June referendum.
"Investors are beginning to demand a higher premium for holding UK government debt because of two factors – the political uncertainty and risks about the economic impact of Brexit, and inflation expectations are rising on the back of a rapidly declining pound," said Kathleen Brooks, research director at City Index.
Elsewhere, the dollar slid against the yen and the euro, falling 0.06% against the former to ¥104.12 and 0.25% against the latter to €0.9096.
"There is so far none of the hysteria that attended global markets late last year into and after the Fed's first rate hike," said Alvin Tan, analyst at Societe Generale. "However, there is clearly room for further dollar gains given the still-low probability priced into the market of a Fed hike by year-end. So another bout of market anxiety is still possible."