The pound extended losses on Tuesday after British MPs rebuffed Prime Minister Boris Johnson's plans to rush his EU divorce deal through parliament, while EU leaders appeared likely to grant another delay in the tortured three-year process.
The vote upended Johnson's pledged timetable for securing Britain's exit from the European Union by next week. Moments earlier, however, lawmakers had endorsed the deal in principle which Johnson had negotiated with Brussels.
Global stocks meanwhile were mixed. Investors were cheered by growing expectations that Washington and Beijing will seal a partial trade deal next month. But the latest batch of corporate results were uneven, sending Wall Street lower.
Sterling's modest decline came a day after it hit a five-month peak at $1.3013, and after parliament forced Johnson to request another extension to Britain's scheduled exit from the European Union.
The pound switched hands at $1.2880 after markets closed in New York, down from $1.2960 24 hours earlier.
Asian and European bourses posted gains. But New York's three major indices all fell into the red later in the day.
"With earnings continuing to come out, we're seeing additional weakness," said Sam Stovall of CFRA Research, who noted that stocks had risen in the period leading into earnings season.
Technology companies with especially big drops included Netflix, which fell 4.1 percent and Facebook, which shed 3.9 percent after New York Attorney General Letitia James announced that she and 46 other attorneys general are now pursuing an antitrust probe of the company.
Meanwhile, Stovall said he was broadly encouraged by the Brexit developments "because we're coming to some sort of conclusion."
On Monday, US President Donald Trump had reinforced hopes he and Chinese counterpart Xi Jinping will be able to put pen to paper on a mini-pact, saying China had already started promised purchases of farm goods, and that the first part of a wider commitment was almost complete.
- Key figures around 2100 GMT -
Pound/dollar: DOWN at $1.2880 from $1.2960 at 2100 GMT on Monday
Euro/pound: UP at 86.39 pence from 86.03 pence
Euro/dollar: DOWN at $1.1126 from $1.1150
Dollar/yen: DOWN at 108.49 yen from 108.62 yen
London - FTSE 100: UP 0.7 percent at 7,212.49 points (close)
Paris - CAC 40: UP 0.2 percent at 5,657.69 (close)
Frankfurt - DAX 30: UP 0.1 percent at 12,754.69 (close)
EURO STOXX 50: UP 0.1 percent at 3,604.82
New York - Dow: DOWN 0.2 percent at 26,788.10 (close)
New York - S&P 500: DOWN 0.4 percent at 2,995.99 (close)
New York - Nasdaq: DOWN 0.7 percent at 8,104.30 (close)
Hong Kong - Hang Seng: UP 0.2 percent at 26,786.20 (close)
Shanghai - Composite: UP 0.5 percent at 2,954.38 (close)
Tokyo - Nikkei 225: Closed for a holiday
Brent North Sea crude: UP 1.3 percent at $59.70 per barrel
West Texas Intermediate: UP 1.6 percent at $54.16