Sterling briefly surged to almost €1.18 against the euro and $1.33 against the US dollar – the highest rate in months – after MPs defeated Theresa May’s government in two more votes on Wednesday night.
The prime minister was forced to concede that she would ask Brussels for a short extension, delaying Britain’s departure until June.
Ms May warned that if MPs reject her deal a third time, Britain will have to take part in European elections in May.
Her statement in the Commons came after a dramatic night for her government after Tory rebels, including several cabinet ministers, helped pass a vote demanding a no-deal Brexit be completely ruled out.
The government was in the end beaten by 321 votes to 278 – a majority of 43.
According to the City of London Corporation’s policy chairwoman Catherine McGuinness, the fluctuations in Sterling were driven by “politics instead of economics”.
She added: “Parliament’s decision to reject a hugely damaging no-deal Brexit is a victory for common sense. MPs have rightly voted in the interests of businesses and households by taking a step away from the brink.”
Dean Turner, UK economist at UBS Wealth Management, said the pound had built on gains made earlier on Wednesday.
However he added “But be in no doubt that the Brexit process remains extremely fluid, with many twists and turns ahead.”