Sterling's rebound came as British lawmakers voted to reject a no-deal exit from the single market -- having also this week voted down the deal negotiated by Prime Minister Theresa May.
Yet another vote will determine whether London should ask the EU for more time beyond March 29 to sort out its departure from the bloc.
"The potential delay of Brexit is what is helping to hold up the pound, but by the same token, the uncertainty is limiting its upside potential," said Fawad Razaqzada at Forex.com.
"If it feels like the UK government is going around in circles, it is because it is," he added.
As the European trading day wore on, the pound rose more than two percent against the dollar on the day.
The pound and the FTSE held up even as Britain's finance minister Philip Hammond slashed the forecast for economic growth this year due to Brexit uncertainty to 1.2 percent, down October's 1.6 percent forecast.
- No rate hike on horizon -
Meanwhile, in New York, investors threw caution to the wind, rallying to new heights for the year despite the Brexit turmoil and US officials' decision to ground the top-selling aircraft of Dow-member Boeing.
Investors also were cheered by economic data showing the US manufacturing sector had a boost in January and wholesale inflation remained tame in February.
Shares in Boeing clambered back into the green for the day after President Donald Trump announced the US decision on the 737 MAX aircraft line, rising 0.5 percent to $377.12, putting it up for the first time in three days but still down nearly 11 percent since before Sunday's deadly crash in Ethiopia.
The Dow, where Boeing's shares are heavily weighted, rose by triple digits, closing up 0.6 percent. The broader S&P 500 and tech-heavy Nasdaq both added 0.7 percent to close at fresh highs for 2019.
Analysts said the markets' indifference to multiple apparent dangers on the horizon -- including weakening corporate revenues, a slowing global economy and Brexit -- was because central banks had clearly signaled a pause on interest rate increases.
"Overall, part of the answer is we have a Fed that has made it clear that they do not expect to raise rates in the short term or mid-term," Quincy Krosby of Prudential Financial told AFP.
"Right now, the market does not see a rate hike this year."
Oil was also well-bid, with the US benchmark WTI contract reaching a multi-month high, driven by falling American stocks and global supply uncertainty.