Sterling (GBP) unruffled by Scotland uncertainty
GBP ticked up slightly after the latest Scottish independence referendum announcement.
Nicola Sturgeon announced on 13 March that she would seek authority from the British Government to hold ‘indyref2’, to take place sometime between late 2018 and spring 2019. Sturgeon said she wanted to give Scotland the choice between a ‘hard Brexit’ and independence.
Headwinds For GBP
Sterling has had a turbulent few months – and late February saw experts worrying about the effect that more uncertainty from Scotland might have on it – but the Scottish First Minister’s announcement didn’t cause the pound to flounder; the currency held relatively steady.
In 2014, Scotland voted to remain in the United Kingdom by a 55% to 45% majority. However, one of the main lines of argument for the “No” campaign centred around Scotland’s membership in the European Union. With the majority of Scots voting to remain in the EU, Sturgeon is calling another referendum to reflect the changed state of affairs.
Despite this further uncertainty for the UK, the pound came out ahead following Sturgeon’s speech: the dollar was $1.223 to the pound on Monday afternoon, compared to Sunday’s $1.217. The euro concurrently sat at €1.146 to the pound from Sunday’s €1.138.
GBP/EUR 5 Minute Price Chart:
Forex Traders Wary of Pound Support
Investors are still warily eyeing sterling after a difficult couple of weeks. Although the pound hasn’t hit the year low of $1.198 (mid-January). It has been put under pressure and is down nearly 5 percent to the dollar since early February. Furthermore, it could be that the pound’s resilience following Sturgeon’s announcement is down to relief at the lack of a solid date for a second independence referendum.
It was also boosted by the response from Theresa May that an request for a vote would be rejected. May’s response being a simple “Now is not the time“.
Uncertainty Still Troubling Major Pairs
Sterling has proven vulnerable to uncertainty within the UK after the shattering EU independence result in June last year. There are fluctuations after every Brexit-related news announcement. Investors have increasingly taken short term positions on the currency.
UK Prime Minister Theresa May is currently pushing through a bill allowing the government to trigger article 50. This will begin the process of the United Kingdom leaving the EU. The triggering of Article 50 is not expected to have an immediate dramatic effect on sterling, but the reactions of other European countries could lead to turbulence.