Glimmer of light underpins sterling

What light through yonder window breaks?

Perhaps it’s emitted by two motions that won more indicative votes last night than UK PM Theresa May's withdrawal agreement did after two hearings.

• The plan for a referendum on any withdrawal agreement won 268 votes in favour, with 295 against
• 264 MPs backed the proposal for a customs union vs. 272 voting ‘no’

Meanwhile, chances that the government can bring its deal back to parliament are receding. The government won’t even try if it doesn’t think it will win. Theresa May’s promise to step down if rebels vote for her formula wasn’t enough. Too many Tory hardliners won’t move. Crucial votes from Northern Ireland’s DUP aren’t forthcoming either. Their leader: “the union comes first”. Speaker John Bercow reiterated his admonishment that a motion must be different for a third airing.

So the Brexit deal is dead (again) and the clock is ticking. But further debates pencilled in for Monday will now focus on fewer possibilities.

Consequently, despite plummeting 130 pips soon after MPs voted ‘no’ to everything, GBP/USD remains in the bottom third of its range since late February and sterling yields limited amounts against crosses too. Selling took sterling to the lower end of an incomplete GBP/JPY wedge.  61.8% of the 1^st February to 2^nd January move conspires with ¥149.82 resistance to form a range constraining GBP/JPY inside the wedge. Best near-term guess is a limited bounce towards the ¥147.20 Fib before sterling declines again. Alternatively, sterling sentiment could continue to deteriorate, triggering a sustained GBP/JPY break down.