It wasn’t just the positive (for the UK, as a whole) news that Scotland would remain within the United Kingdom that dominated the end of last week but also unemployment numbers in the UK which fell to a six year low, helping the pound push up a bit to an almost 2 year high versus the euro. Overall, the result of a NO for the Scottish independence initiative have certainly offered renewed confidence in the pound and with the referendum out of the way (for the most part, as Scotland now waits for the ‘Devo Max’ promises to be enacted), the BoE will return to focusing on getting the UK’s economy back into shape. We’ve seen growth for the last 6 quarters and it’ll mean that we should hopefully see an interest rate increase on the cards for some time next year.
In Europe, things were fairly quiet (or unnoticed) last week as Scotland dominated the narrative. We did see German ZEW data come in positively which gave the single currency a lift against the dollar. There are concerns beginning to grow now, with interest rates being at their historic low for so long, that there isn’t enough growth being seen and how effective the upcoming ABS scheme might be to get things going again.
Last week in the US we saw a drop in the inflation rate from the anticipated 1.9% to 1.7%, causing the dollar to weaken off. It was also decided that the interest rate is to remain where it is for the time being while the QE programme is to be wound down. A 6-8 month timeline for keeping the interest rate on hold has been bandied by Janet Yellen, but, the US are poised to raise/lower it should there be market action to warrant change.
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