Scottish voters go to the polls this Thursday in what’s likely to mark another step in the push for a second referendum on independence. Regardless of the result, most don't expect an imminent vote on independence. Economists at ING expect the impact of the Scottish elections on GBP to be very limited.
See EUR/GBP: Scoxit to eventually become an issue for the pound – Rabobank
GBP currently trades cheap vs EUR, suggesting limited downside
“Although the Scottish election may bring back negative headline news about another Scottish independence referendum, we don’t think this should have an overly negative impact on sterling. This is because (a) a referendum could be years away rather than months (even if pro-independence parties win a majority; (b) as we observed with the Brexit referendum, the risk premium started to be built into GBP only six months ahead of the event; and (c) the first Scottish referendum in 2014 did not translate into a material build-up of GBP risk premium.”
“We note that the pound currently trades cheap vs the euro following the rather tough month of April for GBP. With GBP already screening cheap after its wobbles in April, this should add to the notion of a limited downside to the currency coming from possible negative headline news from the Scottish election.”
“The speculative positioning is the main technical vulnerability for GBP at this point. GBP is currently the biggest G10 FX speculative long as measured by the CFTC data. However, we have already seen some adjustment lower (from 21% of open interest in early March to 15% currently) and with the UK economy likely to see a meaningful recovery this quarter, we expect GBP to remain one of the biggest longs in the G10 FX space for now.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD rises to two-day high ahead of Aussie CPI
The Aussie Dollar recorded back-to-back positive days against the US Dollar and climbed more than 0.59% on Tuesday, as the US April S&P PMIs were weaker than expected. That spurred speculations that the Federal Reserve could put rate cuts back on the table. The AUD/USD trades at 0.6488 as Wednesday’s Asian session begins.
EUR/USD holds above 1.0700 on weaker US Dollar, upbeat Eurozone PMI
EUR/USD holds above the 1.0700 psychological barrier during the early Asian session on Wednesday. The weaker-than-expected US PMI data for April drags the Greenback lower and creates a tailwind for the pair.
Gold price cautious despite weaker US Dollar and falling US yields
Gold retreats modestly after failing to sustain gains despite fall in US Treasury yields, weaker US Dollar. XAU/USD struggles to capitalize following release of weaker-than-expected S&P Global PMIs, fueling speculation about potential Fed rate cuts.
Ethereum ETF issuers not giving up fight, expert says as Grayscale files S3 prospectus
Ethereum exchange-traded funds theme gained steam after the landmark approval of multiple BTC ETFs in January. However, the campaign for approval of this investment alternative continues, with evidence of ongoing back and forth between prospective issuers and the US SEC.
Australia CPI Preview: Inflation set to remain above target as hopes of early interest-rate cuts fade
An Australian inflation update takes the spotlight this week ahead of critical United States macroeconomic data. The Australian Bureau of Statistics will release two different inflation gauges on Wednesday.