For all the opposition to Prime Minister Theresa May’s Brexit deal, the currency market views the looming vote in the House of Commons as almost too close to call.
A Bloomberg survey of 17 strategists and fund managers sees a 55% chance that MPs will reject the accord.
That may sound low, considering the widespread political backlash it received, which cast doubt over her ability to get it through parliament.
Sterling rose against all major currencies amid market optimism there might be ways out of the impasse.
It strengthened against the euro, to 88.4p.
The findings suggest currency strategists see scope for Mrs May to use politicians’ fear of a no-deal Brexit to her advantage.
Shadow chancellor John McDonnell said there may be another referendum if Labour fails to force a general election.
And acknowledging any Brexit option would be worse for the economy than staying in the EU, the government said leaving without any agreement would weigh heavily on UK growth at least into the 2030s.
The Bank of England said the economy would be badly hit by a no-deal Brexit.
“The current draft proposal has attracted many objections, partly because the span of opinions in the UK is wide and no proposal would please all anyway,” said Stephen Jen, chief executive at Eurizon Capital.
“I still think May will get her 320 votes” necessary for the proposal to avoid defeat in parliament, he said.
Chris Beauchamp, chief market analyst at online broker IG, said that uncertainty over the withdrawal bill’s success was weighing on UK stock markets, and money continued to flow out of UK house-building shares.
“While the PM continues to put up a good fight to defend her Brexit deal, she still seems to have an uphill task in getting the deal through parliament,” he said.
“As a result, pure UK economy plays such as housebuilders will remain firmly out of favour.”
The Bloomberg survey may suggest a no vote could send sterling sliding to $1.25, about 2% lower from current levels, while a slightly lower-probability yes outcome may spark a rally to $1.34.
“No one thinks this will get through the first time,” said Steve Fielding, a professor of politics at Nottingham University.
Strategists and fund managers see a relatively small chance of Britain crashing out of the EU without an accord.
Kenneth Broux, a strategist at Societe Generale, sees a 70% chance of parliament voting down the agreement in its current form, triggering a pound selloff.
“The deal will only pass if its amended,” he said.
Bloomberg and Irish Examiner