(Recasts, updates prices)By Saikat Chatterjee and Tom FinnLONDON, March 28 (Reuters) - Sterling sank to a one-week lowon Thursday as the prospects for a swift agreement on Brexitfaded with the British parliament failing to agree on a wayforward.The pound struggled against a resurgent dollar and tookanother leg down after a British government source said that aso-called "meaningful" vote in parliament on May'stwice-defeated deal would not take place on Friday.Instead, a parliamentary debate on Brexit will take place.The currency fell more than 1 percent as concerns grew thatMay's offer on Wednesday to resign had failed to convincehardline eurosceptics in her party to back her withdrawal deal.May's prospects for getting her deal through - and indeedfor surviving as prime minister - are worsening and investorssee little chance of the impasse being broken soon.Former foreign minister Boris Johnson, who led the 2016referendum campaign to leave the European Union, said May's deal- already defeated twice in parliament - is now dead, London'sEvening Standard newspaper reported on Thursday. Another Conservative Party lawmaker, Mark Francois,denounced May's EU divorce deal as "rancid" and said he wouldreject it again if parliament voted on it again. "Boris Johnson's comment one day after the DUP said it wouldnot support the deal, has added to the already bearish sentimenton the pound," said Kenneth Broux, a currency strategist atSociete Generale in London.The Democratic Unionists (DUP) are the Northern Irish partythat props up May's minority government.The pound tumbled more than 1 percent to a one-week low of$1.3035 on Thursday. Against the euro, it weakened 1.2percent to 86.06 pence, a four-day low. .British lawmakers' failed to agree on an alternative plan ina series of "indicative votes" on Wednesday. "The stalemate over Brexit continues as parliament isindicating clearly what it doesn'twant, but no clarity on whatit wants," said Lee Hardman, a currency strategist at MUFG inLondon.
In a sign of how nervous the currency markets have become,expectations of how much the pound will move in the coming weekshave climbed faster than bets on how volatile the pound will beover a year.One-month implied volatility GBP1MO= in sterling has risenby a quarter to nearly 13 vol, and the spread between theone-month and one-year maturities has reached its widest pointsince the British referendum vote in June 2016.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^GBP vol curve ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Saikat ChatterjeeEditing by Mark Heinrich and Angus MacSwan)