The pound faltered on Tuesday as dealers mulled Britain's parliamentary suspension and the outlook for a Brexit deal.
Sterling, which had won ground this week on the fading prospect of a no-deal Brexit, retraced some of those gains versus the euro and dollar.
"The pound has pulled back a little... after the currency experienced a strong bounce in the past week due to fears of a no-deal Brexit receding as parliament successfully passed a bill intended to prohibit it," noted XTB analyst David Cheetham.
"With no more parliamentary sessions due for five weeks the focus now turns to the prospects of a new deal being negotiated between the UK and the EU."
Dealers nevertheless digested upbeat official data showing that the UK's unemployment rate fell to a 45-year low of 3.8% in July.
British Prime Minister Boris Johnson failed again late on Monday to get MPs to back a snap election, handing a brief boost to sterling.
The latest defeat on calling an election saw the pound briefly rally more than one percent against the dollar from as low as $1.2234 to as much as $1.2385, its highest level since the end of July.
"Despite an encouraging UK jobs report, the pound is slipping away from earlier highs," said City Index analyst Fiona Cincotta added on Tuesday.
"The reality of the chaos at Westminster hits home," she added.
"With no resolution to Brexit or any sense of control returning to UK politics the pound could struggle to keep its head above water in the coming sessions."
Just before Westminster lawmakers broke up for five weeks, lawmakers inflicted yet another defeat on the new premier, who has been thwarted in his attempts to call an early poll as he looks to win a majority in parliament and push through a no-deal Brexit.
MPs had earlier also voted to demand the government publish confidential documents about Britain's readiness to leave the European Union on October 31 without a divorce deal.
Johnson insists he will not ask for a delay to the Brexit date.
"With no more parliamentary sessions due for five weeks the focus now turns to the prospects of a new deal being negotiated between the UK and the EU," Cheetham added.
"Boris Johnson clearly believes that removing the threat of no-deal significantly weakens his negotiating position."
Europe's main stock markets meanwhile struggled as investors mulled speculation that the European Central Bank could deliver economy-boosting measures on Thursday.
Asian equities also wobbled after last week's rally, with hopes building that the ECB could push eurozone interest rates deeper into negative territory.
"Traders are playing the wait and see game in relation to the ECB meeting," noted CMC Markets analyst David Madden.
"To a certain extent, some form of monetary easing from the ECB has been priced in."
The ECB announcement comes a week before the Federal Reserve's next meeting, where it is also tipped to announce a further reduction in borrowing costs.
Oil prices meanwhile rose after Saudi Arabia's new energy minister, Prince Abdulaziz bin Salman, said output cuts would benefit all exporting nations. The remarks suggested he would support reductions to address an oversupplied market and sagging prices.