With the 230-vote margin far more than markets were anticipating, the pound received some support, particularly against the euro and the dollar, on some expectations the scale of defeat might force lawmakers to pursue other options.
Goldman Sachs strategists said in a note the defeat signals the prospect of a disorderly "no deal" Brexit has receded with a greater probability of an extension to the end-March deadline.
In early Wednesday trade, the pound strengthened to 88.44 pence per euro -- its strongest level since late November. Against the dollar, the pound was broadly flat at $1.2866 after seesawing in a broad 1.5 percent trading range overnight.
"A softer Brexit is now a possibility with a higher probability," said Stephen Jen, co-chief investment officer at London-based hedge fund Eurizon SLJ Capital, who sees the fair value of the pound around $1.50. (Reporting by Dhara Ranasinghe, Saikat Chatterjee and Maiya Keidan; editing by Andrew Cawthorne)