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Pound swings wildly after May's Brexit deal defeated

Alanna Petroff
Senior Economics Correspondent at Yahoo Finance UK
Pro-Brexit supporters held up placards outside the House of Commons in the hours before the parliamentary vote. Photo: John Keeble/Getty Images

The UK pound was highly volatile after British members of parliament rejected prime minister Theresa May’s Brexit deal by a wide margin.

A total of 432 MPs voted against the deal and 202 MPs supported the deal.

The pound (GBPUSD=X) was down by more than 1% against the US dollar on Tuesday immediately after the vote, but then shot back up to trade above $1.28. It had been dipping against the euro (GBPEUR=X) and then shot up into positive territory to trade just above €1.12.

“Traders are seemingly taking the outcome as paving the way for an extension of the [Brexit] deadline, rather than increasing the chances of a no-deal Brexit and this has caused the recovery seen in the pound,” explained David Cheetham, chief market analyst at the online trading firm, XTB.

Experts widely expected MPs would vote against May’s deal, putting the country in political and economic limbo.

Analysts across the City of London had been warning investors to be wary of the pound, with Brexit threatening major price volatility.

The leader of the Labour party, Jeremy Corbyn, tabled a motion of no-confidence against Theresa May’s government moments after the vote was finalised.

The prime minister is set to head back to Brussels in yet another attempt to secure concessions from the European Union on the deal – something EU Commission president Jean-Claude Juncker has repeatedly said he is not willing to do.