The British pound dropped against the dollar and euro on Friday, as UK Prime Minister Boris Johnson sought to force through Brexit with the help of an early general election.
EU ambassadors on Friday meanwhile postponed until next week a decision on how long to delay Britain's exit from the bloc.
Around 1330 GMT, sterling was down at $1.2820, while the euro climbed to 86.59 pence.
Earlier this week, the pound broke $1.30 for the first time in five months on optimism that a no-deal Brexit would be avoided.
Elsewhere on Friday, European stock markets dropped after a mixed showing in Asia, as traders digested another batch of global corporate earnings.
In foreign exchange, "the latest political twist keeping sterling under pressure has a touch of surrealism about it", noted Ricardo Evangelista, senior analyst at ActivTrades.
"There is an absurdity about the situation and the markets are reacting by once again walking away from the pound."
With Johnson giving up on a pledge for Britain to leave the EU by October 31, the prime minister has said his wish is now for a general election on December 12.
Should it be held and his Conservative party win, analysts see parliament finally approving his Brexit deal.
But opposition MPs are reluctant to agree to Johnson's poll demand unless they can be certain Brexit has been postponed beyond Halloween and that the UK will be spared a no-deal divorce from the European Union.
But some EU members, notably France, oppose granting an extension until January 31, as requested by the UK parliament.
They instead want a shorter delay unless Britain can show it is organising a general election that could clarify its Brexit position.
- US-China trade -
Away from the Brexit saga, investors awaited the latest developments in the China-US trade talks.
Optimism that the two economic superpowers would hammer out details for a mini agreement by next month have helped support equities this week.
There remain concerns however that the talks could be derailed at the last minute, with the passage of a US bill defending civil rights in Hong Kong the latest bump in the road.
Adding to the mix were comments from Vice President Mike Pence, who vowed support for Hong Kong pro-democracy protesters and hit out at China's trading behaviour.
Wall Street opened lower on Friday, with the Dow dipping 0.1 percent in the first minute of trading.