* Labour's McDonnell says few MPs to back May - analysts
* May's top lawyer is in Brussels, no breakthrough seen
* Britain's services recover slightly in Feb - PMI
* Graphic: World FX rates in 2019
* Graphic: Trade-weighted sterling since Brexit vote (Adds details, new chart, updates with latest prices)By Tommy Wilkes and Sujata RaoLONDON, March 5 (Reuters) - Sterling fell on Tuesday afterthe opposition Labour party's finance spokesman was quoted assaying few lawmakers would back Prime Minister Theresa May'sproposed Brexit deal, and there was little sign of abreakthrough in talks with Brussels.The British currency has dropped this week, reversing someof last week's surge, as traders book profits and investors turnnervous again about the sort of divorce Britain and the EuropeanUnion will have and when - or possibly even if - it will occur.
Analysts cited comments attributed to Labour's JohnMcDonnell that few Labour lawmakers would support May's Brexitproposed deal when it is voted on or by March 12, meaning itcould be defeated given her lack of a reliable majority. The pound was also hurt by media reports that MichelBarnier, the EU's chief negotiator, and Britain's attorneygeneral and Brexit minister were unlikely to make significantheadway in talks in Brussels over tweaks to the deal demanded byhard-line Brexiteers in May's Conservative Party. "It's an excuse to take some profits," said Kenneth Broux,an analyst at Societe Generale.The pound, unchanged earlier in the day, dropped 0.6 percentto a one-week low of $1.3097 before recovering toslightly above $1.31.
It fell half a percent against the euro to 86.47 pence pereuro but later rebounded to 86.13 pence.
One of the best-performing major currencies so far in 2019,sterling rose sharply last week as investors bet a no-dealBrexit would be avoided and Britain's EU exit delayed.
If May fails to get her deal passed in parliament, lawmakerswill be given a vote on postponing the EU departure date onMarch 29 to avoid an economically disruptive no-deal Brexit."My overwhelming feeling is that there is too much good newspriced into sterling. The market is too complacent," saidStephen Gallo, an analyst at BMO.
Gallo believes there is a 53 percent chance of a no-dealBrexit, much higher than most banks, because a small Brexitdelay does little to resolve deep divisions within May's partyover the best sort of break from the EU.Earlier in the session, sterling was helped by data for theUK's dominant services sector. The data were still weak andpointing to an economy close to stagnation, but came in slightlybetter than expected.After touching its lowest level in January since immediatelyafter the 2016 Brexit referendum, the IHS Markit/CIPS UKServices Purchasing Managers' Index edged up to 51.3 from 50.1.A Reuters poll of economists had forecast a weaker reading of49.9 in February. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^GBP falls further from recent highs vs euro, dollar ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Tommy Wilkes and Sujata Rao; editing by LarryKing)
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