{"id":60395,"date":"2014-09-15T18:41:32","date_gmt":"2014-09-15T22:41:32","guid":{"rendered":"http:\/\/countingpips.com\/?p=60395"},"modified":"2014-09-15T18:41:32","modified_gmt":"2014-09-15T22:41:32","slug":"currency-crunch-looms-over-scottish-referendum","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2014\/09\/currency-crunch-looms-over-scottish-referendum\/","title":{"rendered":"Currency crunch looms over Scottish referendum"},"content":{"rendered":"
September 15, 2014<\/div>
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On the brink of Scotland voting \u2018yes\u2019 or \u2018no\u2019 for independence, financial markets have suddenly grown queasy.<\/strong><\/p>\n

\u200b\u200bIn the last week, the uncertainty has seen GBP fall against the EUR and slide to 10-month lows against the USD. Meanwhile, the cost of hedging against sharp swings from a possible \u2018Yes\u2019 vote to end the union has soared significantly: GBP one-month implied volatility leapt to its highest since July 2013.<\/p>\n

What this means for traders?<\/strong><\/p>\n

Traders are now left in a quandary. The cost of taking insurance against a \u2018Yes\u2019 vote has risen markedly; two-week GBP\/USD implied volatility straddling the date of the vote has tripled to 12%. This means it could be an expensive option to take if the \u2018No\u2019 vote wins.<\/p>\n

If the \u2018No\u2019 vote succeeds, GBP could enjoy a relief rally, which makes sterling\u2019s current valuations attractive. That Mark Carney, governor of the Bank of England, has suggested UK interest rates could rise as soon as Spring 2015, could be interpreted as a bull signal for GBP.<\/p>\n

However, traders preparing for this eventuality risk being exposed if the \u2018Yes\u2019 vote succeeds. In this scenario, even at current levels, hedging positions against a break-up of the union may appear to be the cheaper option.<\/p>

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Expectations for the week ahead<\/strong><\/p>\n

– Risk of tumultuous market conditions this week, with GBP reacting to each new sentiment poll that is released.<\/p>\n

– Possibly more announcements from the big corporates. Royal Bank of Scotland and John Lewis threatened to move out of an independent Scotland and warned of rising prices, respectively. BlackRock, the world\u2019s largest investment manager, recently said it was shorting sterling by buying various derivatives. Other fund managers have claimed investors are already withdrawing money from UK equity funds.<\/p>\n

– Any significant shift in favour of the \u2018Yes\u2019 vote could see GBP continue to depreciate.<\/p>\n

– Any relief rally of GBP in the event of a \u2018No\u2019 vote could be short-lived; next year\u2019s general election and then a potential referendum on European Union membership may weigh on financial market participants.<\/p>\n

Outcome of the final debate<\/strong><\/p>\n

Recent polls suggest Alex Salmond and his independence campaign have at least closed the gap on Alistair Darling and the Better Together campaign, following the most recent debate.<\/p>\n

The \u2018No\u2019 campaign is still leading by 52% to 48%, according to the latest YouGov poll, but the \u2018Yes\u2019 campaign is maintaining its gains. That has led the country\u2019s two biggest bookmakers, Ladbrokes and William Hill, are laying 7-to-4 odds against a \u2018Yes\u2019 vote.<\/p>\n

The Scottish Referendum vote will be held on Thursday 18 September. The result could be announced overnight or in the morning of Friday 19 September.<\/p>\n

\u200bArticle provided by uk.saxomarkets.com<\/a><\/strong><\/p>\n

Original Article: http:\/\/uk.saxomarkets.com\/trading\/forex\/currency-crunch-looms-over-scottish-referendum<\/a><\/p>\n

Disclaimer:<\/strong> This material should be considered as a marketing communication under the Financial Conduct Authority\u2019s rules. Saxo Capital Markets UK Limited (“SCML”) undertakes reasonable efforts to ensure that any information published in this communication is reliable. SCML makes no representation or warranty, or assumes no liability, for the accuracy or completeness of any information contained in in this communication.<\/p>\n

SCML provides an execution only service and this communication does not take into account any particular recipient’s investment objectives, special investment goals, financial situation, and special needs and demands and nothing herein is intended as a recommendation for any recipient to invest or divest in a particular manner and SCML assumes no liability for any recipient sustaining a loss from trading in accordance with a perceived recommendation.<\/p>\n

Saxo Capital Markets UK Limited is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.\u200b<\/p>\n

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On the brink of Scotland voting \u2018yes\u2019 or \u2018no\u2019 for independence, financial markets have suddenly grown queasy. \u200b\u200bIn the last week, the uncertainty has seen GBP fall against the EUR and slide to 10-month lows against the USD. Meanwhile, the cost of hedging against sharp swings from a possible \u2018Yes\u2019 vote to end the union […]<\/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-60395","post","type-post","status-publish","format-standard","hentry","no-post-thumbnail"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/60395","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=60395"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/posts\/60395\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/media?parent=60395"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/categories?post=60395"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/forex\/wp-json\/wp\/v2\/tags?post=60395"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}