"The pound's Wednesday only got worse after the confirmation that Theresa May is seeking a short delay from the EU, one that arguably does not give the government enough time to get through a sterling-positive Brexit deal," Spreadex analyst Connor Campbell told AFP.
"It appears that, despite the various votes highlighting MPs unwilling to leave the EU without a deal, that kind of disastrous exit is still very much on the table."
The pound lost about half a pence in the space of roughly 10 minutes after May announced the delay, bringing its loss for the day to around one percent.
May had been widely expected to ask the bloc for an extension of the March 29 deadline for leaving, having seen her exit proposals killed off by MPs.
The European Commission, for its part, warned EU leaders in an internal briefing note ahead of an summit in Brussels that delaying Brexit to June 30 would bring "serious legal and political risks".
It urged a shorter postponement to before European Parliament elections in May, or a much longer one to at least the end of this year.
"This is the only way of protecting the functioning of the EU institutions and their ability to take decisions," said the commission note, which was prepared before May's request for a delay until June 30.
- Fed watch -
Later Wednesday, the Federal Reserve's March policy meeting concludes, with analysts predicting it will announce a slower pace of interest rate hikes as the world's biggest economy shows signs of softening amid trade tensions.
Wall Street opened without much change.
"US stocks are hovering near the unchanged mark as investors tread water ahead of the afternoon release of the Fed's rate decision," said analysts at Charles Schwab brokerage.
Investors also eyed China-US trade talks, optimism about which have helped propel equities higher across the world this year -- offsetting concerns about the outlook for the global economy,
But dealers have been spooked by a report that some US officials are feeling some pushback from China on a number of demands, including on the crucial issue of intellectual property.
The unnamed negotiators said the Chinese side was growing concerned at the lack of assurances that US duties would be removed, according to the Bloomberg story.
- 'Floodgates could open' for Bayer -
In Europe, Frankfurt fell the heaviest with Bayer shares tumbling after a US jury ruled its weedkiller Roundup was a "substantial factor" in an amateur gardener's cancer.
Frankfurt stocks meanwhile sank 1.5 percent as the threat to German giant Bayer and its subsidiary Monsanto from US litigation swelled.
"Bayer shares have sold-off sharply ... after a US jury found that the company's weed killer, Roundup, caused cancer," said CMC Markets analyst David Madden.
"This could open the floodgates to further cases, and the group might have to set aside vast sums of money for potential cases."
The news sent Bayer shares nosediving roughly 11.5 percent to 61.69 euros in afternoon trading.