(Bloomberg) -- The pound climbed modestly as U.K. lawmakers voted to block Prime Minister Boris Johnson from taking the nation out of the European Union without a deal.
Tuesday's ballot was the first hurdle to passing legislation meant to stop a no-deal outcome, by forcing the premier to delay Brexit if a deal can't be struck in time.
Sterling's rebound from the lowest since 2016 began earlier, after Johnson, who has vowed Britain will exit the EU on Oct. 31 with or without an agreement, lost his majority in the House of Commons. One of his party members defected to the Liberal Democrats, a move seen as potentially making a hard Brexit less likely.
“There's still a few hurdles to clear, but the risks to Brexit are slightly more two-sided now,” rather than skewed towards a no-deal exit, said Canadian Imperial Bank of Commerce currency analyst Bipan Rai. “We're not ready to say that a no-deal Brexit is out of the picture, but a squeeze could see momentum build for a constructive pound in the next few sessions.”
The legislation aimed at preventing a no-deal departure will face further votes Wednesday.
The U.K. currency gained 0.1% to $1.2092 in early Asian trading after hitting $1.1959 Tuesday, the lowest since October 2016. Sterling fell earlier after Johnson vowed to call a snap election if he lost Tuesday's vote. Sterling has tumbled almost 19% since the June 2016 Brexit referendum.
It has come under increased pressure on Johnson's move to suspend Parliament for a month before Brexit, prompting markets to price in a higher probability of a no-deal result. A Bloomberg survey last month found a delay was one of the most positive outcomes for the pound, and could push it up to $1.26.
To contact the reporters on this story: Charlotte Ryan in London at cryan147@bloomberg.net;Katherine Greifeld in New York at kgreifeld@bloomberg.net
To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Anil Varma, Mark Tannenbaum
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