The pound dropped against its major rivals in the European session on Friday, weighed by worries over the future of U.K. Prime Minister Theresa May amid divisions within Conservative party demanding her resignation.

Concerns emerged after former party chairman Grant Shapps demanded a leadership contest following May's closing speech at the Conservative party conference on Wednesday.

Shapps said he had the backing of about 30 MPs, including five former cabinet minister.

"I think she should call a leadership election," Shapps told BBC Radio 5 live.

In order to trigger a vote of confidence, 48 MPs should write to the chairman of the party's so-called 1922 Committee.

Investors were also fretted over political risks in Spain.

Spanish banks came under selling pressure again after the Catalan government said it would press ahead with its planned parliament meeting on Monday to discuss Sunday's referendum result and announce a unilateral declaration of independence in defiance of a court ban.

Data from the mortgage lender Halifax and IHS Markit showed that UK house prices increased at a faster pace in September.

House prices increased 4 percent year-on-year in three months to September, faster than the 2.6 percent rise seen in three months to August. This was the biggest annual growth since February and exceeded the expected rate of 3.6 percent.

The currency has been trading in a negative territory in the Asian session.

The pound declined to 0.8970 against the euro, its lowest since September 14. If the pound falls further, 0.905 is possibly seen as its next support level.

Data from Destatis showed that Germany's factory orders rebounded at a faster than expected pace in August.

Factory orders grew 3.6 percent month-on-month in August, reversing a revised 0.4 percent fall in July. Orders were forecast to climb 0.7 percent.

The pound weakened to more than a 4-week low of 1.3052 against the greenback, compared to 1.3119 hit late New York Thursday. On the downside, 1.29 is likely seen as the next support level for the pound.

The pound that closed Thursday's deals at 147.98 against the yen slid to a 3-week low of 147.41. Further downtrend may take the pound to a support around the 146.00 mark.

Preliminary data from the Cabinet Office showed that Japan's leading index improved to the highest level seen since early 2014 in August.

The leading index, which measures the future economic activity, rose to 106.8 in August from 105.2 in the previous month.

Reversing from an early high of 1.2837 against the Swiss franc, the pound dropped to a new 3-week low of 1.2785. The pound is seen finding support around the 1.26 area.

Looking ahead, U.S. and Canadian jobs data for September, U.S. wholesale sales and consumer credit for August as well as Canada Ivey PMI for September are set for release in the New York session.

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