The British pound was trading in a tight range on Wednesday after U.K. Prime Minister Theresa May’s Brexit deal was defeated in Parliament Tuesday and as lawmakers are debating a no-confidence motion against the government.
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The vote against May’s Brexit deal was largely expected, but the severity of the defeat took some by surprise: the House of Commons voted 432-202 against the deal, with 118 of May’s fellow Conservatives turning against her. Labor Party leader Jeremy Corbyn has made good on his promise to bring a vote of no-confidence in the government on Wednesday. The motion is being debated throughout the day, ahead of a vote at 7 p.m. local time (2 p.m. Eastern U.S. time).
If Parliament declares it has no confidence in May’s government, fresh elections could be called down the line. However, some traders said they doubt the no-confidence motion will even see the light of day.
Meanwhile, May has until Monday to present a new option or options to Parliament. “This increases the possibility that Britain will ask for an extension to Article 50 — i.e., a delay of Brexit past the official 29 March date — while it tries to figure out something that they can all agree on,” said Marshall Gittler, chief strategist at ACLS Global, in a note to clients.
The pound GBPUSD, -0.0622% , which swung nearly 2% against the U.S. dollar Tuesday, was trading in a tight range on Wednesday, last changing hands at $1.2870, up from $1.2860.
Sterling pared the sharp losses it incurred over the course of Tuesday trading after May’s deal was rejected, as May vowed she wasn’t trying to run down the clock on the Brexit timeline. The rejected vote also buys some time and increases the chance of a Brexit reversal, which is sterling-positive, market participants said.
The euro EURGBP, -0.0563% was slightly weaker versus the pound, buying £0.8857, down 0.2%.
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Elsewhere, the ICE U.S. Dollar Index DXY, +0.04% was little changed at 96.043.
The euro EURUSD, -0.1227% slipped to $1.1401, compared with $1.1415 late Tuesday. The shared currency suffered on Tuesday after European Central Bank President Mario Draghi said economic developments in the currency bloc had been weaker than expected.
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The worst performers among G10 currencies were the Australian dollar AUDUSD, -0.2917% and New Zealand dollar NZDUSD, -0.4841% , in the wake of soggy December consumer spending figures out of New Zealand.
The Aussie dropped 0.4% to $0.7178, while the kiwi was down 0.7%, buying $0.6775.
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