The pound declined against the dollar following news that British Prime Minister Theresa May survived a no-confidence vote as currency traders weighed the impact of the vote on May’s efforts to negotiate the country’s departure from the European Union.
The pound had been gaining against the dollar earlier on Wednesday, rising 1.2% from $1.2487 to $1.2653 before the vote’s result was announced. Once news that the no-confidence challenge failed, the pound retreated back to $1.2596.
The British currency has been volatile as May worked to secure the passage of a plan to withdraw the U.K. from the European Union. A successful no-confidence vote would have brought greater uncertainty and political instability to the Brexit process. On Wednesday, as traders began to bet that May would survive the vote, the pound began to rally.
Following the vote, however, traders turned their attention back to the challenge May faces in winning approval of a Brexit agreement she negotiated with Brussels. That task seems all the harder since the vote’s margin was 200 in favor of May remaining as Prime Minister and 117 against, a show of stronger opposition to May than many had expected.
“I thought the pound would drop a bit more but it held on, and that’s a good sign for the market,” Romaine Bostick, a Bloomberg TV anchor, said following the vote. “The market didn’t freak out. The out only thing that changed was that she survived the confidence vote. We’re basically back where we were on Tuesday.”
Against the euro, the pound fell from €1.1126 before the vote to €1.1088 afterward, a decline of 0.3%. The pound had risen 0.8% against the euro during the previous trading day.
The news had little impact on the U.S. dollar overall. The Dollar Index, which tracks the dollar’s value against a basket of major international currencies, was little changed following the vote.