The pound fell from a two-week high ahead of Theresa May’s visit to Brussels on Wednesday.
The Prime Minister was headed to the Belgian capital in a bid to break the Brexit deadlock, and sterling had risen to £1.3076 earlier in the session amid optimism that Ms May could find a way to solve the Irish backstop issue.
However, the pound dropped against the dollar and the euro after three Tory MPs quit the party to join the newly formed Independent Group.
The currency was down 0.27 per cent against the dollar, at $1.3027, and fell 0.25 per cent against the euro to €1.1490.
“It’s not a big surprise the three resigned from the party so there’s no big market reaction,” said Mikael Olai Milhoj, an analyst at Danske Bank A/S.
“But it does make life harder for Theresa May, giving her an even smaller majority.”
Heidi Allen, Sarah Wollaston and Anna Soubry left the Conservative Party, having been heavily critical of the PM’s approach to Brexit and the growing influence of eurosceptics in the party.
The move means the Independent Group now has 11 members, as many as the Liberal Democrats, including the eight MPs who have walked out of Jeremy Corbyn’s party in recent days.
Additional reporting by newswires
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