London, UK - 16 January 2019

1. Various of currency traders

2. Various set-up shots of analyst Michael Baker

3. SOUNDBITE (English) Michael Baker, analyst at ETX Capital:

"After we saw the vote come out, which was a historic defeat, we saw Sterling drop immediately. A knee jerk reaction. But it was only a very brief one and we've seen Sterling push back up and reach levels against the Euro that we've not seen since November. This is on the back of possible optimism on a delay of the deal or a possible renegotiation or even, you know, the possibility now of putting the vote back back to the public. All these different ideas are just trying to distract from the possibility of a no-deal."

4. Various of traders

5. SOUNDBITE (English) Michael Baker, analyst at ETX Capital:

"The next few weeks is going to continue as it has been, it's been so volatile, it's you know, it is moving in a sideway range, it's not depreciating as much as you, know has, it has been in the past. It is stabilized but on the low, it's just waiting for some sort of positive reaction or some sort of reaction from you know, some sort of deal, some sort of agreement between the two parties. But time does tick on, and if we do start to see that, you know, we can't get a deal through the House (of Commons), and, you know, we're not going to get an extension of Article 50, we could see that it starts to drop again."

6. Various of traders

7. SOUNDBITE (English) Michael Baker, analyst at ETX Capital:

"The worst case scenario for Sterling would be to continue on and not come to an agreement and push on to the 29th of March 11 p.m. without a deal. So we would sever all contact with the EU in terms of trade and all these previous agreements we have . It'd be probably a jump into the unknown here and you would see Sterling continue to drive in the fashion it has done over the last couple of years, start to push on to new lows, all time lows and the sort of lows we've not seen in many, many years."

8. Various of traders

Frankfurt, Germany - 16 January 2019

9. Various of trading floor at Frankfurt stock exchange

10. SOUNDBITE (English) Carsten Brzeski, chief Economist DIBA bank:

"The closer we get to the scenario of a no-deal Brexit by the end of March, obviously, we'll get market turmoil, we’ll get a weaker Pound Sterling and we will also see that this will hit the European economy. Well, let's say, when you just look at the fact that the European economy should be able to digest a no-deal Brexit at least temporarily, but given that we are currently in a slowdown period of the European economy, we could see that this will hit confidence that the temporary negative impact from a no-deal Brexit scenario could actually lead to a self-fulfilling prophecy and could then in turn actually lead to a further slowdown of the European economy, which means that a no-deal Brexit scenario would clearly be a lose-lose situation for both the UK and the European economy."

11. Cutaway

12. SOUNDBITE (English) Carsten Brzeski, chief Economist DIBA bank:

"Funny thing, the pound actually appreciated vis-a-vis the Euro, but honestly I think it doesn't make sense to read anything in short -term market reactions because the base case assumption was that the deal would not go through the British Parliament last night. So this was fully priced in. I think really the most interesting part will be what's going to happen in the next couple of weeks and there markets, I think, have clearly underestimated the risk of a no-deal Brexit by the end of March."

13. Various of trading floor

The British pound steadied in morning trading on Wednesday after an initial dip following the British parliament’s resounding rejection of Prime Minister Theresa May’s Brexit deal.

The result of the vote came as little surprise to traders, with the deal having been widely predicted to be rejected, and some analysts believe consequences in a potential delay of a withdrawal from the European Union could inject markets with a level of optimism.

What comes next will, however, be crucial.

"Time does tick on and if we do start to see that we can't get a deal through the House (of Commons) and we're not going to get an extension of Article 50, we could see that it starts to drop again," said Michael Baker, a market analyst in London.

A no-deal scenario on the 29 March, the planned withdrawal date of Britain from the EU, could see the pound drop to "the sort of lows we've not seen in many, many years," Baker said.

Carsten Brzeski, chief Economist DIBA bank in Frankfurt, said that scenario would not only cause market turmoil but cause a further slowdown of the European economy.