Pound holds its ground after May's Brexit battering

The pound edged down Wednesday after the record defeat of British Prime Minister Theresa May's Brexit plan but mostly held its ground as investors consider the next likely developments in the long-running saga.

Sterling tanked to a near two-year low soon after the government's proposal on leaving the EU was soundly beaten on Tuesday evening, but it soon bounced back as traders bet the vote reinforced their view that there would not be a "no-deal" exit.

And while it was slightly lower in Asia the pound managed to avoid the sort of pummelling many had predicted and analysts say the positive news is that the options for the future are narrowing, which is largely positive.

With May expected to win a vote of no confidence called by the opposition Labour Party on Wednesday, talk will move to what happens next.

Analysts say May could ask to delay Britain's March 29 exit as she looks for a more palatable agreement from her EU peers, while there is growing speculation of a general election and even another referendum.

"Momentum is shifting away from the harder Brexit route and towards a number of options ranging from postponement and second referendum.

That is pound supportive," said Gavin Friend at National Australia Bank.

But he added: "I don't see the pound rallying much until markets are sure the (ruling) Conservatives have seen off the confidence motion."