Sterling fell Wednesday as U.K. lawmakers voted in favor of requesting a delay to Brexit beyond March 29 by a vote of 412 to 202.
GBP/USD traded at $1.3255 during the voting process, but trimmed losses just after the result.
Many are expecting lawmakers in Brussels to grant the U.K. a short delay to Brexit, but remain wary the EU could attached strings to an extension. EU leaders will be meeting on March 21 to discuss whether to grant the U.K. an extension to Brexit.
The length of an extension and the conditionality, if any, the EU attaches will determine the market response, senior economist at Aberdeen Standard Investments.
Ahead of the EU summit, Prime Minister Theresa May said she will make a third attempt to get her withdrawal deal through parliament in a vote on Tuesday. May’s withdrawal deal was voted down earlier this week and at a vote in January.
The vote to delay Brexit comes a day after the lawmakers voted to reject a no-deal Brexit under any circumstances.
In the run-up to the final vote, lawmakers voted to reject a series of amendments, the highlight of which was Labour MP’s Hilary Benn’s amendment, which would have allowed lawmakers to put forward alternative Brexit options, taking control of the process.
Labour MP Lucy Powell’s amendment, which specifies that Article 50 should only be extended until 30 June, was narrowly rejected.
Independent Group MP Sarah Wollaston’s amendment, which called for an extension of Article 50 to allow another referendum to take place, was rejected by 334 votes to 85.