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 percent probability on a no-deal Brexit, down from 20 percent, and a 50 percent probability on an orderly Brexit, down from 60 percent. The chance of no Brexit at all doubled to 40 percent from 20 percent, 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.
Sterling, which has see-sawed on Brexit news since the referendum, traded well off the 17-month lows it hit on Tuesday, lifted by suggestions that Britain may opt not to leave the European Union after all.
In the June 23, 2016 referendum, 17.4 million voters, or 52 percent, backed Brexit while 16.1 million, or 48 percent, backed staying in the bloc.
If parliament rejects her deal, May has warned Britain could leave without a deal or that there could be no Brexit at all.
Supporters of Brexit have said that if Brexit is reversed, the United Kingdom will be thrust into a constitutional crisis as what they say the financial and political elite will have thwarted the democratic will of the people.
While May's Conservatives and the main opposition Labour Party both say they respect the 2016 vote to leave, a growing number of backbench members of parliament say the only solution may be a new referendum giving voters an option to stay in the EU.
If the deal is voted down, some members of parliament from both main parties have said they would act to stop a Brexit with no agreement, which business chiefs and investors fear would weaken the West, spook financial markets and block trade.