The pound sunk to its lowest level against the dollar in 2018, falling more than half a cent on Tuesday morning, adding to heavy falls in Monday’s session

Sterling slipped to $1.3183 as pressure mounted on Prime Minister Theresa May after her government suffered another defeat over Brexit in the House of Lords on Monday.

The Lords voted by a landslide for a Brexit Bill amendment devised by Tory MP and pro-EU rebel Dominic Grieve to give parliament a “meaningful vote” on the final divorce deal reached between the government and Brussels. Mr Grieve’s proposal will give MPs a vote, even in the event of a “no-deal” scenario.

“This will not only test May’s ability to steer a minority government, but also the pounds buoyancy as pro-EU rebels promise they can collapse the government if their demands aren’t met,” said Jasper Lawler, head of research at London Capital Group.

“Theresa May showing signs of weakness and an inability to control her party wouldn’t bode well for the future as several other pieces of legislation are still needed in order to prepare for Brexit.”

The Commons will now vote on the revised amendment on Wednesday with movements in sterling expected to be more muted until then.

A stream of negative indicators for the economy has also weighed on the pound in recent weeks, with the latest data released on Monday showing that house prices are cooling.

The weakening economic outlook decreases the likelihood that the Bank of England will raise interest rates at its next Monetary Policy Committee meeting.

The pound’s fall against the dollar comes amid deepening fears of a US-China trade war sparked by Donald Trump.

On Monday night, the US president threatened to impose a 10 per cent tariff on $200bn of Chinese imports in response to tariffs on $50bn of US goods announced by Beijing, which was itself retaliating to Mr Trump’s first round of tariffs on$50bn of Chinese goods.