Pound soars against US dollar and Euro as markets react to decisive Commons vote against Theresa May's Brexit plan

The pound recovered against the US Dollar and Euro yesterday evening as the markets reacted to Theresa May's Brexit plan defeat.

Parliament voted 432 to 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 per cent before the outcome of the vote, briefly extended losses to fall 1.5 percent before rebounding sharply to stand up 0.10 per cent on the day at $1.2877.

Against the euro, the pound strengthened and was up 0.67 per cent standing at €1.1289 - a five day high.

It showed how the British currency rallied on some expectations that the scale of the defeat might force lawmakers to pursue other options.

Markets did not seem to be panicking, with the pound rising in value following the results, which were announced at around 7.40pm.

XTB online trading said: 'Traders are seemingly taking the outcome as paving the way for an extension of the Article 50 deadline, rather than increasing the chances of a no-deal Brexit and this has caused the recovery seen in the pound.

'Attention now turns to what happens next with the levels of uncertainty raised once more and moving up to unprecedented heights.'

But such a heavy defeat for the government is likely to lead to a lot of volatility in the markets - which will only be worsened by an upcoming vote of no confidence.

Lawmakers voted yesterday in a no-confidence motion from opposition leader Jere- my Corbyn that could trigger a national election.

Commenting on this, Nigel Green, founder and chief executive of deVere Group, said: 'Following the leader of the opposition Labour party, Jeremy Corbyn's tabling of a vote of no confidence, there is greater chance of a general election.

But in normal times this would spook the markets and have a directly negative impact (in the short-term at least) on the pound, the FTSE and UK financial assets generally.

'But these are not normal times, and the DUP and Conservative MPs who vote against the government's Brexit bill are unlikely to vote against the government. A general election seems a low probability outcome.'

Prior to the vote on Tuesday, currency traders were awaiting more volatility, depending on the scale of the defeat and what might happen next.

City Index's Fiona Cincotta believed the pound would tank if Parliament rejected the deal with a large majority - but this appears not to be the case.

She said: 'Labour (will) look to call a vote of no confidence in Theresa May, pushing for a general election.

'Domestic political chaos, the prospect of a Labour government and on-going Brexit uncertainty would be a toxic combination for the pound, sending it back towards $1.20 and the post Brexit referendum lows.

'An extension of Article 50 seems almost inevitable at this stage. This would offer some support to the pound as investors see the risk of a no-deal fading.

'How the pound moves thereafter depends not only on what Plan B is, but also Labour's reaction.'