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.