{"id":60142,"date":"2014-09-10T09:36:26","date_gmt":"2014-09-10T13:36:26","guid":{"rendered":"http:\/\/countingpips.com\/?p=60142"},"modified":"2014-09-10T09:36:26","modified_gmt":"2014-09-10T13:36:26","slug":"scottish-independence-vote-likely-to-rattle-currency-markets","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/09\/scottish-independence-vote-likely-to-rattle-currency-markets\/","title":{"rendered":"Scottish independence vote likely to rattle currency markets"},"content":{"rendered":"<div id=\"inves-1917100783\" class=\"inves-below-title-posts inves-entity-placement\"><div id =\"posts_date_custom\"><div align=\"left\">September 10, 2014<\/div><hr style=\"border: none; border-bottom: 3px solid black;\">\r\n<\/div><\/div><h3>Expect a bumpy ride in the run up to and fall out from the Scottish referendum.<\/h3>\n<p>\u200bOn September\u00a018, Scottish voters will be asked the\u00a0question: &#8220;Should Scotland be an independent country?&#8221; Financial markets have barely battered an eyelid, but that\u2019s likely to change as the vote draws nearer.<\/p>\n<p><strong>What does this mean for traders?<\/strong><\/p>\n<ul>\n<li>The currency and bond markets are not currently pricing in a victory for the \u2018Yes\u2019 vote.<\/li>\n<li>Implied volatility \u2013 a foreign exchange measure of market risk \u2013 is still languishing below historical norms.<\/li>\n<li>There is little fear\u00a0among investors of a sovereign breakup with\u00a0UK\u00a0government bonds\u00a0outperforming treasuries.<\/li>\n<li>With no precedent to this Scottish referendum, however, market behaviour in the build up to and fall out from September 18 could prove tetchy and over-responsive.<\/li>\n<\/ul>\n<p><strong>Prepare for the unexpected<\/strong><\/p>\n<p>Sterling (GBP) has been weakening against the euro (EUR) and US dollar (USD) recently, although how much of that is due to the referendum is open to debate.<\/p>\n<p>There seems to be a creeping unease in markets. A\u00a0shock victory for the &#8216;Yes&#8217; vote, which is not being priced in, could prove to\u00a0be very messy for markets.<\/p>\n<p>The latest YouGov polls\u00a0suggests\u00a0that Scotland will remain part of the union with 51%\u00a0expected to vote \u2018no\u2019. That\u2019s not much wiggle room if market sentiment has gauged this outcome incorrectly.<\/p><div id=\"inves-4283953665\" class=\"inves-in-content inves-entity-placement\"><hr style=\"border: 1px solid #ddd;\">\r\n<div id=\"inpost_ads_header\">\r\n<p style=\"font-size:10px; float:left; color:#666;\">Free Reports:<\/p><\/div>\r\n<div id=\"inpost_ads\"> \r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/1ApBOV\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2018\/06\/graph_techs_PD.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t     <a href=\"https:\/\/goo.gl\/1ApBOV\"><b><u>Get Our Free Metatrader 4 Indicators<\/u><\/b><\/a> - Put Our Free MetaTrader 4 Custom Indicators on your charts when you join our Weekly Newsletter<\/p><br><br>\r\n<br>\r\n<br>\r\n<p style=\"font-size:15px; float:left;\"><a href=\"https:\/\/goo.gl\/f3RrHX\"><img loading=\"lazy\" decoding=\"async\" src=\"https:\/\/investmacro.com\/wp-content\/uploads\/2019\/01\/cot_pie_80.png\" align=\"left\" width=\"80\"  height=\"55\"\/><\/a>\r\n\t    <a href=\"https:\/\/goo.gl\/f3RrHX\"><b><u>Get our Weekly Commitment of Traders Reports<\/u><\/b><\/a> - See where the biggest traders (Hedge Funds and Commercial Hedgers) are positioned in the futures markets on a weekly basis.<\/p><br><br>\r\n<\/div>\r\n<hr style=\"border: 1px solid #ddd;\">\r\n<br><\/div>\n<p><strong>Likely outcomes of a \u2018Yes\u2019 vote:<\/strong><\/p>\n<ul>\n<li>The existence of a United Kingdom would be called into question, shaking Britain\u2019s place as the top table of the UN and the G7.<\/li>\n<li>Edinburgh and London will likely dispute what is defined as \u201cindependence\u201d, potentially leaving sterling (GBP) in limbo \u2013 with serious consequences for UK financial instruments, as well as FX markets.<\/li>\n<li>Currency volatility may\u00a0spike with traders flocking to the\u00a0US dollar (USD), although the euro (EUR) will likely benefit too.<\/li>\n<li>Debt is an issue; a decision remains to be made on how much debt Scotland would take with it, leading to questions over English and Scottish ratings in the sovereign markets \u2013 huge upheaval in the bond markets\u00a0may\u00a0ensue.<\/li>\n<\/ul>\n<p>Stock markets might\u00a0be less volatile than currency markets: Scotland only accounts for circa 2% of FTSE 350 sales, according to recent research from Barclays.<\/p>\n<p>Oil companies, however, could be a different story given the dispute over the rights to the oil in the North Sea.<\/p>\n<p><strong>What happens next?<\/strong><\/p>\n<p>Alistair Darling, the Better Together chief, and Alex Salmond, Scotland\u2019s First Minister, will go head-to-head at the final debate, scheduled for exactly a week before the September 18 polling day.<\/p>\n<p>As the vote draws near, the economic significance of a break-up of the union is becoming a key battleground. Markets, though, are pricing in little if any risk of Scottish independence, so it would send shockwaves through UK markets were it to happen. The fallout for the UK economy could be enormous and send the pound (GBP) into reverse; it would be \u2018tin-hat time\u2019.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Article provided by <a href=\"http:\/\/uk.saxomarkets.com\/\" target=\"_blank\">uk.saxomarkets.com<\/a><\/strong><\/p>\n<p>See the original article here: <a href=\"http:\/\/uk.saxomarkets.com\/trading\/markets\/scottish-independence-vote-likely-to-rattle-currency-markets\" target=\"_blank\">http:\/\/uk.saxomarkets.com\/trading\/markets\/scottish-independence-vote-likely-to-rattle-currency-markets<\/a><\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Expect a bumpy ride in the run up to and fall out from the Scottish referendum. \u200bOn September\u00a018, Scottish voters will be asked the\u00a0question: &#8220;Should Scotland be an independent country?&#8221; Financial markets have barely battered an eyelid, but that\u2019s likely to change as the vote draws nearer. What does this mean for traders? The currency [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-60142","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/60142","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/comments?post=60142"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/60142\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=60142"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=60142"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=60142"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}