Sterling fell against the euro but continued to trade higher in the week, as investors placed their hopes on MPs forcing through legislation banning the UK from leaving the EU with no deal.
That helped push up Ftse-100 stocks which benefit from weaker sterling, but undermined Irish shares and bank shares, in particular.
After MPs failed on Monday night to agree on a way forward, investors were focusing on the chances of plans by some MPs today to outlaw a crash-out Brexit.
Capital Economics in London said the chances of an early UK general election had increased.
“The next election is not due until 2022, but the betting markets now think there’s a 50% chance of one this year. This could happen in one of two ways. First, Theresa May could be ousted if more than half of MPs were to vote against her in a no-confidence motion... Second, Mrs May could call an election, which would require two-thirds of MPs to vote for it. She could use this threat to get MPs to back her Brexit deal in a fourth vote,” the economists said.
Online broker IG said political events have “seen the extraordinary turn into the ordinary, markets are becoming more blasé about any further indicative or meaningful votes. Unfortunately, with May’s deal seemingly dead in the water, she is left with precious few options as we creep towards a no-deal Brexit”.
French president Emmanuel Macron said a long Brexit extension is “not evident or automatic”.
However, he said he is open to new British proposals on the way forward, including new elections, a referendum, or a different future relationship, such as a customs union with the EU.
“We cannot spend months working out the modalities of a divorce,” said the French president, who has tended to be among the most hardline leaders in discussions on Brexit. “We cannot be held hostage to a British political problem.”
The UK parliament’s failure to find a new consensus “puts us on a path to hard Brexit,” President Macron said in Paris, speaking alongside Taoiseach Leo Varadkar.
Mr Varadkar, echoing Mr Macron, as well as comments from the EU’s chief negotiator Michel Barnier, said changes can be made to the agreement covering the future relationship as a way out of the impasse.
Additional reporting Bloomberg