AUD/USD trims losses on upbeat China services PMI
The pound pushed higher on Wednesday, extending the day’s gains as mounting opposition to British Prime Minister Theresa May’s Brexit deal prompted some investors to start pricing in chances of averting Brexit altogether.
GBP/USD was up 0.41% to 1.2767 by 08:56 AM ET (13:56 GMT) after falling to its lowest level since June 2017 on Tuesday.
The euro slid lower against the pound, with EUR/GBP down 0.19% to 0.8899.
Opposition to the Brexit deal mounted on Wednesday after May’s government was forced to publish legal advice showing the UK could be locked indefinitely in the European Union's orbit.
May was forced by parliament to publish advice from the government's top lawyer about the fallback mechanism, or backstop, to prevent the return of border controls between British-ruled Northern Ireland and the EU-member Irish Republic.
"Despite statements in the Protocol that it is not intended to be permanent and the clear intention of the parties that it should be replaced by alternative, permanent arrangements, in international law the Protocol would endure indefinitely until a superseding agreement took its place," the advice said.
"In the absence of a right of termination, there is a legal risk that the United Kingdom might become subject to protracted and repeating rounds of negotiations."
After a string of humiliating parliamentary defeats for May the day before cast new doubt over her ability to get a deal approved, U.S. investment bank J.P. Morgan said the chances of Britain calling off Brexit altogether had increased.
Brexit, the UK's biggest economic and political shift since World War Two, has repeatedly plunged British politics into crisis since the shock 2016 vote to leave the EU.
Now May is trying to get her deal approved by a parliament which shows every sign of striking it down in a vote on Dec. 11. It is unclear what happens if the deal is rejected as Britain is due to leave on March 29.
If parliament rejects her deal, May has warned Britain could leave without a deal or that there could be no Brexit at all.
On Tuesday, just hours before the start of a five-day debate in the British parliament on May's Brexit deal, a top law official at the European Court of Justice (ECJ) said Britain could pull back its formal divorce notice.
"The UK now appears to have the option of revoking unilaterally and taking a period of time of its own choosing to decide what happens next," J.P. Morgan economist Malcolm Barr wrote in a note to clients.
He placed a 10% probability on a no-deal Brexit, down from 20%, and a 50% probability on an orderly Brexit, down from 60%. The chance of no Brexit at all doubled to 40% from 20%, in a sign of perhaps the biggest shift in perception since the 2016 vote to leave.
Britain's pro-Brexit trade minister Liam Fox said it was now possible that Brexit would not happen. There was a real danger that parliament would try to "steal" Brexit from the British people, Fox told a parliamentary committee on Wednesday.
While May's Conservatives and the main opposition Labor Party both say they respect the 2016 vote to leave, a growing number of backbench lawmakers say the only solution may be a new referendum giving voters an option to stay in the EU.