Brexit Secretary Dominic Raab said in a statement on Thursday that he "cannot in good conscience support the terms proposed for our deal" to leave the European Union. He is the second Brexit Secretary to resign this year.
The United Kingdom is due to leave the bloc — its biggest trading partner — on March 29, 2019.
The pound fell 1.6% against the dollar to below $1.28 following the resignation. It was trading flat earlier.
The development could derail the Brexit deal that Prime Minister Theresa May has painstakingly negotiated with the European Union. May said Wednesday that she had secured the support of her cabinet for the deal, but its future is now in real doubt.
She also warned that the alternatives to her plan were leaving the European Union without a deal, or Brexit not happening at all.
Investors are most worried about a scenario in which Britain crashes out of the European Union without having negotiated an orderly departure. That would mean new trade barriers, disruption to supply chains for food, medicines and manufactured goods, and a shock to the broader economy.
"The risk of very disorderly Brexit is increasing as we speak," said John Wraith, head of UK rates strategy at UBS.
This is a developing story
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