GBP/USD has fallen from highs of $1.3478 to lows of $1.3369.
On Monday it was initially rumoured that a Brexit agreement had been reached, but it later emerged that the Democratic Unionist Party (DUP) MPs had dismissed the Irish border proposal.
The suggestion that a hard border would be avoided by keeping Northern Ireland under EU free trade conditions was quickly rejected by DUP leader Arlene Foster, who instead demanded that Northern Ireland “must leave the EU on the same terms as the rest of the United Kingdom.”
In similarly negative news, the UK services PMI fell in November, indicating slower sector growth.
Commenting on the stats was Chris Williamson, IHS Markit Chief Business Economist.
Mr Williamson said: “Slower service sector growth comes as a disappointment after the improved performances of both manufacturing and construction in November.
“However, despite the weaker service sector expansion, the latest survey data indicate that the economy is on course to enjoy robust growth in the fourth quarter.
“Uncertainty about the economic outlook, linked commonly to Brexit worries, continued to permeate the business mood in November.”
Mr Williamson concluded with an outlook on inflation, stating that “the survey data suggest that inflationary pressures have yet to peak”.
Meanwhile, the US dollar has risen thanks to optimism about tax reform plans.
The sweeping reforms recently gained Senate approval, despite ongoing scepticism about their ultimate benefit to the US populace.
For the rest of daily trading, the pound could be influenced by any breakthroughs in the Brexit process.
Theresa May is understood to be entering reconciliation talks with the DUP leadership today, so in theory there could be a positive update over the afternoon.
If May does bring news of Conservative and DUP unity on the issue of border regulations, the pound could rise sharply.
Even if a breakthrough isn’t announced, however, the pound could still make a cautious advance against the US dollar this afternoon.
High-impact US data is predicted to print negatively, which might devalue the US dollar.
As well as a trade deficit expansion in October, economists are also forecasting lower non-manufacturing activity and a falling composite PMI figure for November.
A reduction in economic activity might not cause a Federal Reserve rethink on its presumed December US interest rate hike, but could cause longer-term problems.