The pound surged to a nine month high in the aftermath of last night's House of Commons vote on a no-deal Brexit - but then immediately slumped again.
Sterling rose 2.4 per cent to a peak of $1.33 after MPs voted for a motion rejecting no-deal Brexit - it's highest level since June 2018.
But it has since fallen 0.6 per cent and currently sits at $1.32 as MPs prepare to vote today on whether to ask the EU for an extension to the Article 50 negotiation period.
Stephanie Kelly, Aberdeen Standard Investment's senior political economist, said sterling had rallied in expectation that Article 50 would be extended today.
She said: "Sterling’s rollercoaster will continue in the days ahead though and key factors determining the size of any moves are whether the EU grants an extension, how long that extension would be and the possibility that (prime minister) Theresa May runs out of political road and we end up with a snap general election."
London's stock market has been relatively unmoved by the events in parliament, with the FTSE 100 down 0.1 per cent this morning (March 14) and the more domestically focused FTSE 250 starting trading down 0.04 per cent.
David Zahn, head of European fixed income at Franklin Templeton, said: "We believe there’s still a very real chance the UK could crash out of the European Union without an agreement on the post-Brexit relationship.
"But in the short term, we expect a positive reaction from markets to the decision to rule out no deal—at least until the next development."
Hugh Savill, director of regulation at the Association of British Insurers, said: "It is right that parliament has said it can't support a no-deal Brexit, which would be an unforgivable act of economic and social self-harm.
"It is now essential that this is put on a firm, legislative footing. Given how much time is left, an extension to Article 50 seems inevitable and is certainly preferable to no deal by accident."