Sterling's Reaction to Scottish Yes or No Vote

I hope for Betfair’s sake that the Scottish Referendum turns out to be a No vote otherwise their early pay out they’ve just made on tomorrow’s vote it going to have been a costly one. It reminds me of one of their competitors that paid out early on Manchester United winning the premiership in the 2011-12 season only to see them slip up in the last stretch and get beaten by Manchester City on goal difference. As mentioned in my last blog on the subject, this vote is going to be very close and there is a distinct chance that the Yes Campaign could pip the No Campaign at the post. This will open a Pandora’s box of negotiation after negotiation on who owns what and how much should be shared between whom. This will cause months and months of uncertainty, something the UK economy can ill afford.

The markets are pricing in a No vote too as sterling has so far this week reasserted itself with GBPUSD recovering to 1.6350, from recent lows around 1.6050 and EURGBP declining back below the 0.8000 level after a brief visit above it. Opinion polls have on average been consistently showing the No Campaign ahead, but sometimes the heart overrules the head and those wavering between yes and no will be conscious that this is their best chance to change the course of Scottish history.

So, how will sterling react in the event of a Yes or No vote? Forecasting FX rates are notoriously difficult however we have put together some thoughts below:

Short-Term and Medium-Term Sterling Forecasts