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UPDATE 4-Pound losses capped as UK parliament vote sets stage for Brexit delay

Kate Duguid, Tom Wilson and Elizabeth Howcroft

delay@ (Updates prices, paragraphs 1, 7)

NEW YORK/LONDON, Oct 22 (Reuters) - UK lawmakers rejected the government's proposed Brexit timetable, but losses in the British pound remained limited as chances of a no-deal exit from the European Union are now seen as miniscule.

Ahead of the votes on Tuesday - for the Brexit legislation, and then for its ratification by Oct. 31 - Prime Minister Boris Johnson had warned parliament that if it defeated him on the timetable and forced a delay until January he would abandon his attempt to ratify the deal and push for an election instead under the slogan of "Get Brexit Done."

But Johnson's remarks following the vote mentioned neither.

"There has been no mention of him pulling the deal, no mention of an election, so those seem to be empty threats at the moment," said John Doyle, vice president for dealing and trading at Tempus Inc.

And if the prime minister were to pursue an election it would likely be to advance the existing legislation.

"We believe a no-deal Brexit is now extremely unlikely, because if the UK moves to a general election Johnson will campaign on his current deal," said Peter Kinsella, head of foreign exchange strategy at UBP.

Although the vote on Tuesday left the pound down 0.62% against the dollar at $1.288, its bottom was only a two-day low. Against the euro it hit a session low and was last 0.44% weaker.

"Obviously this has been pound-negative," said Doyle, "but the pound is still very elevated considering where it has been over the last couple of weeks."

In a rare victory for Johnson, lawmakers on Tuesday voted 329 to 299 in favor of his Brexit deal at an important second reading, which would open the agreement up to debate and possible amendment. It was the first time parliament has signaled support for a deal on how Britain would leave the EU, although still at an early stage in the legislative process.

But minutes later lawmakers voted 322 to 308 against a motion which set out a three-day schedule to rush the legislation through the House of Commons, which the government says is necessary to achieve Brexit on time.

"The extended timeline marginally increases uncertainty, meaning that aggressive GBP/USD up-moves are now unlikely in the short-term. Bottom line GBP upside is still viable, but it will take longer to manifest," said Kinsella.

Optimism that the UK will not leave the European Union without a deal has been buoyed in recent weeks, boosting the pound about 6% since Oct. 10, which on Monday lifted it to a 5-1/2-month high of $1.3012. (Reporting by Tom Wilson and Elizabeth Howcroft in London and Kate Duguid in New York Editing by Mark Potter and Matthew Lewis)

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