Sterling fell on Friday as investors fret over Boris Johnson's chances of pushing his Brexit deal through parliament, while Asian markets were mostly down after data showed China's economy expanded at its slowest pace in nearly three decades.
The pound rallied almost to $1.30 on Thursday following news that negotiators had hammered out an agreement that would avoid Britain's leaving the EU without a divorce deal, a move many warn would be economically catastrophic.
WATCH | What next after UK, EU agree Brexit deal?
However, the joy was soon tempered by the realisation that the British prime minister faces an uphill task in getting it past lawmakers, with opposition MPs and even some in his own Conservative party saying they were against it.
Most importantly, Northern Ireland's Democratic Unionist Party (DUP), which props up Johnson's government, said it was "unable to support these proposals".
Forex traders sold sterling, pushing it back down below $1.29, and it extended losses in Asia.
READ | UK's Johnson urged to embrace no-deal Brexit
Focus is now on a crucial vote on the deal pencilled in for Saturday.
"Much will depend on the PM's ability to get some if not all DUP and (Scottish National Party) MPs onside, in addition to also getting the backing from the 21 ex-Conservative MPs he expelled from the party last month," said National Australia Bank's Rodrigo Catril.
"Rejection of the deal might well see more political brinkmanship around a 'no-deal' Brexit, but the most likely scenario would be yet another extension of the 31 October Brexit date."
Jeffrey Halley, senior market analyst at OANDA, said whichever way the vote goes, "Traders should prepare themselves for some severe volatility on Monday morning, with multiple big-figure moves a strong possibility."
Asian equity markets were mostly lower after China said its economy expanded 6% in the third quarter, marking the slowest pace in 27 years, as leaders struggle to address weak domestic demand and the long-running US trade war.