LONDON, Jan 15 - Sterling rebounded smartly from the day's lows and rallied more than a cent to stand above $1.28 after British lawmakers defeated Prime Minister Theresa May's Brexit divorce deal by a crushing margin on Tuesday.
While the outcome could potentially trigger political upheaval that could lead to a disorderly exit from the European Union, the British currency rallied on some expectations that the scale of the defeat might force lawmakers to pursue other options.
Parliament voted 432-202 against May's deal, the worst parliamentary defeat for a government in recent British history. Scores of her own lawmakers - both Brexiteers and supporters of EU membership - joined forces to vote down the deal.
The pound which was down as much as 1.2 percent before the outcome of the vote, briefly extended losses to fall 1.5 percent before rebounding sharply to stand down 0.4 percent on the day at $1.2823.Against the euro, the pound strengthened a quarter of a percent to 88.81 pence.