It is not clear whether the pound will recover or fall further, says John Marley, an analyst at Smart Currency Business.

"One scenario is that May wants to avoid an embarrassing defeat... another is that she may be very close to securing agreement from the EU with further negotiation so sterling could still move either way from here," he said.

Chris Turner, head of currency strategy at ING in London, said the likely loss of the vote accompanied by the growing risk of a leadership challenge "should be negative for the pound and send EUR/GBP above £0.9000 this week".

Image source, Reuters

David Cheetham, chief market analyst at XTB says that an expected delay to Tuesday Brexit vote "may have spared an embarrassing parliamentary defeat for the prime ministerbut it will no doubt see those calls for her to be replaced grow ever more vociferous".

He says: "The negative reaction in the markets is more likely due to what it means for her position rather than the failure to win the vote - with even her staunchest supporters already highly skeptical as to whether the bill would pass - as it now seems increasingly likely that a long-touted leadership challenge will ensue."

This chart show's the pound's precipitous fall against the dollar today.

Sterling is now trading at $1.2664 against the greenback, marking a fall of half a per cent since the start of the day.

The sterling is also taking a pounding against the euro, and is back at September levels.

To it put another way, a euro is now worth more than 90p.

Image source, NurPhoto / Getty Images

Simon Harvey, FX analyst at Monex Europe, says that while the markets thought that uncertainty had finally peaked, a possible delay on the Brexit vote proves them wrong.

"Sterling has been reluctant to move from the $1.27 handle this month as the key juncture of a meaningful vote approached. Previously, the diminishing chances of a no-deal Brexit failed to prompt a rally in the pound, as did the increasing chances of the Brexit timeline being reset or scrapped," he said.

"This reinforced the assumption that the path of least resistance for sterling was always down to the high likelihood of a deal being rejected.

"However, by delaying the vote, May has all but accepted a defeat was the likely outcome and this increases uncertainty in the market. Today’s developments ultimately proved enough to push the pound to its lowest level in the last 18-months as it repriced the possibility of a no-deal Brexit."

The FTSE 100 is now largely flat at 6,773.78 while the FTSE 250 is down 1% at 17,658.71.

In Paris, the CAC-40 is off 0.71% while in Germany, the Dax is down 0.63%.

Stephen Innes, head of trading at OANDA, says: "Another day, another reason to sell risk. Equity markets remain in a world of pain with everyone in search of a very elusive silver lining."

Image source, AFP

Hamish Muress, currency analyst at International payments firm OFX, says that the confusion over whether the Brexit vote will go ahead on Tuesday "provides the market [with] an insight into the chaos and disagreement within Downing Street".

"Rumours that Theresa May is set to pull tomorrow’s vote contradict those of a Downing Street spokesperson, and the fact the news was broken over a conference call instead of in a cabinet meeting speaks volumes."

He says: “Many predicted that tomorrow would be the big day for any movement in the pound. However, it has already reached three-month lows against the euro and, depending on whether the vote tomorrow goes ahead, could hit lows last seen against the dollar in August.”

Image source, Getty Images

Neil Wilson, chief market analyst at Markets.com, says: "Money seems to be moving on the prospect that the Brexit vote will be pulled, opening up a new front of uncertainty for investors. Sterling remains at the mercy of highly sensitive news flow around Brexit and this morning has been a case in point".

He asks what does pulling the vote mean? There are options ranging from new talks over the backstop or even a second referendum.

"The only known is that the uncertainty has increased and we are faced with more volatility for sterling and UK assets".

BBC political editor Laura Kuenssberg also says that there may be a statement from Brexit Secretary Stephen Barclay related top Article 50.

While she also says...

The pound is now down against the dollar at 0.49% at $1.2671.

It is 0.64% lower against the euro at €1.1098.

More breaking news.

A court in London has just ruled that Indian tycoon Vijay Mallya should be extradited from the UK to India to face fraud charges.

The pound is now down 0.27% against the dollar at $1.2698.

Sterling is off 0.33% against the euro at €1.1133.

Meanwhile, BBC political editor Laura Kuenssberg tweets:

Image source, Reuters

The Governor of India's central bank is stepping down.

Urjit Patel said in a statement: "On account of personal reasons, I have decided to step down from my current position effective immediately.

"It has been my privilege and honour to serve in the Reserve Bank of India (RBI) in various capacities over the years. The support and hard work of RBI staff, officers and management has been the proximate driver of the Bank’s considerable accomplishments in recent years.

"I take this opportunity to express gratitude to my colleagues and directors of the RBI central board, and wish them all the best for the future."

Meanwhile, the pound has fluttered a little lower against the dollar at $1.2678.

Image source, Getty Images

France expects its economy to grow at a slower-than-expected 1.5% this year following the yellow vest protests.

The country's junior economy minister Agnes Pannier-Runacher said she expects the unrest to trim GDP by 0.1 percentage points.

The protest could hurt retail sales and tourism in Paris ahead of Christmas.

Official estimates had pegged economic expansion at 1.7% for 2018. But Ms Pannier-Runacher said: "Growth will be more like 1.5%."