LONDON (Reuters) - Sterling fell by almost a cent against the dollar on Tuesday after British Prime Minister Theresa May's office said she would make a statement outside Downing Street at 10.15 GMT.
Sterling fell as low as $1.2515 from around $1.26 as investors awaited the statement, which follows media reports that some senior Conservatives favour calling an early parliamentary election. It earlier hit a three-week high of $1.2608.
The pound also hit the day's low of 85.11 pence per euro, having earlier touched an eight-week high.
It is unusual for leaders to make a statement outside Number 10 Downing Street and most prime ministers only use the setting for major announcements. Her office gave no indication on the subject of Tuesday's statement.
Britain's FTSE pared losses slightly, last down 1 percent, after sterling dipped to a day's low. Its majority foreign-earning constituents tend to gain when sterling is weak.
British government bonds extended gains, with yields on 10-year debt falling to their lowest since mid-October at 1.007 percent by 0927 GMT, more than 3 basis points down on the day.
Reporting by Jemima Kelly, Patrick Graham, David Milliken and Helen Reid