Glimmer of light underpins sterling

What light through yonder window breaks? (For sterling, at least)

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 1st February to 2nd 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.

Price chart: Sterling/Japanese yen – daily [28/03/2019 15:03:03]

Source: Tradingview/City Index



Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.