GBP/USD drops below 1.25 as Scottish parliament backs a second referendum

Eren Sengezer FXStreet

The GBP/USD has found itself under renewed selling pressure as Scottish First Minister Nicola Sturgeon's motion calling for a new independence referendum in late 2018 or 2019 passed by 69 votes in favor and 59 votes against.

After breaking below 1.25, the pair refreshed its daily low at 1.2470 and is now down %0.65 at 1.2477. Additionally, the US Dollar Index, led by the strong performance of the yield on the benchmark 10-year U.S. Treasury note, leaped to 99.30, putting further pressure on the pair. As of writing, the U.S.10-Year bond yield is up more than 1% at 2.4%.

Following the Scottish parliament's voting outcome, UK government said that they wouldn't be entering into negotiations and it would be unfair to ask the people of Scotland to make a crucial decision like that without the necessary information about UK's future relationship with EU. Although Theresa May insisted that it wasn't the right time for a second referendum, Sturgeon argued that when Article 50 of the Lisbon Treaty is triggered tomorrow, change for Scotland at that point becomes inevitable.

Article 50 to be triggered: "So what now?" - Westpac

Technical outlook

A break below 1.2450 (Fib. 61.8% of Dec/Jan drop) could open the doors for 1.2415 (50-DMA/100-DMA) and 1.2340 (Mar. 21 low). On the upside, the first hurdle is located at 1.25 (psychological level) followed by 1.2560 (Mar. 27 high) and 1.2670 (Jan. 26 high).

Author

Eren Sengezer

FXStreet

As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.

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