Special Report - Effects of the Scottish Referendum
19/Sep/2014 • Currency Updates•
By Enrique Diaz, Chief Risk Officer at Ebury
Scottish voters have rejected independence by a considerable margin, much wider than had been hinted at by the polls. The large margin is important, in our view, and positive for Sterling. It excludes the possibility that a repeat referendum will be called in the foreseeable future. The status quo is safe in the United Kingdom, and that is always good for the currency.
The sell-off in Sterling after the referendum reflects the overwhelming prior consensus among traders that the result would be a No, and the resulting stretched long GBP position. A clear case of ‘buy the rumour, sell the news’. We think trading will remain choppy until this position is cleared out, which we expect to happen in a few days.
The main remaining obstacle to a Bank of England interest rate hike has been cleared, and so we expect this to happen in the second quarter of 2015.