The following are some final thoughts by Deutsche Bank, JP Morgan, and Credit Agricole on how GBP will likely react to the outcome of today's Scottish referendum.
DB: Today’s vote on Scottish independence is the largest UK risk event in recent memory. The initial market reaction will be binary (we think a ‘yes’ vote would trigger a 4-6% gap lower in the pound versus euro and dollar, while there is limited upside, perhaps only 0.5-1%, on a ‘no’), but more interesting question is what happens next?
JPM: Chances are that rate expectations would be downgraded to reflect a hit to business confidence and near-term growth prospects which would justify an additional decline in GBP – cable could fall another 3- 4% were the market to remove one of the two rate increased priced for next year. A drop of 6-7% in cable is thus possible in the first few weeks after a vote for independence. A No vote would of course trigger a bounce, but most likely of a smaller magnitude, perhaps 3-4%, as the speculative market is not yet materially short of the pound despite the extent of cable's drop since the June peak at 1.72
CA: The polls close at 10pm local and no set timetable for release of the results. We suspect it will occur in the early morning hours on Friday once it is certain that one side or the other will win. We think the ‘No’ camp will win and look for GBP/USD to bounce back to 1.65 as result.
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