The pound tumbled on Monday after Theresa May said there was not sufficient support for another vote on her proposed Brexit deal, making the prospect of a no-deal scenario appear more likely.
The Prime Minister told the Commons in the afternoon that a third meaningful vote would not go ahead on Tuesday, though she still hoped to put the decision to parliament later this week.
Despite starting the morning on a stable footing, the pound lost confidence as the day wore on to eventually close lower.
Sterling was 0.31% lower versus the US dollar at 1.317 and 0.3% down on the euro at 1.164.
The FTSE 100 was also in the red, shedding 30.01 points, or 0.42%, to close at 7,177.58.
Its European peers meanwhile also declined, with the German Dax down 0.15% and the French Cac 0.18% lower.
David Madden, market analyst at CMC Markets UK, said: “Stock markets are in the red today as traders remain cautious about the state of the European economy.
“The dreadful manufacturing figures from France and Germany, from Friday, are still playing on traders’ minds.
“The poor economic reports from the two largest economies in the eurozone acted as a wake-up call to investors, that a no-deal Brexit is likely to be painful for the Continent as well as the UK.”
In London, shares in Majestic dropped after the wine retailer announced a store closure plan as part of a wider transformation that will see the group stomach extra costs.
As part of the restructuring, Majestic will also rebrand as Naked Wines following its takeover of the group in 2015, and invest a further £6 million a year in the business.
The stock fell 33p to 238p.
Analysts at Liberum said: “The sale of Majestic, or site closures, is a complete change and this could have material impacts to the balance sheet, and dividends – quite a change in tone and strategy since the CMD last year.”
The Debenhams debacle also rumbled on, with Mike Ashley’s Sports Direct hitting out at the retailer for rejecting his latest attempt to wrest control of the business.
Debenhams’ shares declined 0.04p to 1.548p.
Inmarsat shares rocketed 48.8p to 555p after it agreed to be taken over by a consortium of private equity firms including Apax and Warburg Pincus in a £2.6 billion deal.
Under terms announced on Monday, the satellite communications group will be sold for cash at 7.21 US dollars (546p) a share.
Oil prices were almost flat as optimism was held back by concerns of a global economic slowdown. A barrel of Brent crude oil was trading at 67.24 US dollars, down 0.4%.
The biggest risers on the FTSE 100 were Fresnillo up 16.4p to 850p, Ocado up 23.5p to 1,255.5p, Rio Tinto up 68.5p to 4,299.5p and Persimmon up 17p to 2,155p.
The biggest fallers on the FTSE 100 were DS Smith down 12.2p to 330.1p, NMC Health down 78p to 2,346p, United Utilities down 26.2p to 837.4p and Pearson down 23.4p to 825.8p.