Sterling has tumbled to its lowest level in 10 months on growing concerns that Scotland could vote for independence from the United Kingdom later this month, writes FTAdviser sister title FastFT.
A surge of support for independence – which until recently looked overwhelmingly unlikely – has wrongfooted Westminster politicians and rattled investors, who fret that the consequences could be severe if a big chunk of the country secedes.
The UK currency has lost 1 per cent of its value against the US dollar this morning, its biggest one-day decline in over a year and the worst performance of any major currency in the world today.
If one includes exotic, tiny currencies then only the Afghan afghani, Sierra Leone’s leone, the Tongan pa’aanga, the Vanuatu vatu and the Malawi kwacha have done worse than sterling today, according to Bloomberg data.
At pixel-time sterling was at $1.617, the lowest since November last year.
Kit Juckes of SocGen wrote: “The first opinion poll pointing to a ‘Yes’ vote in the Scottish independence referendum, has caused chaos in the ‘No’ camp, and a lot of volatility in financial markets.
“To re-iterate our position on this, we believe that a ‘yes’ poses more questions than it answers, and this will be negative for sterling, perhaps to the order of 5% overall.
“It would increase moves for secession across Europe, increase the momentum for the UK to leave the EU and hurt Scottish economic growth potential.”
The Scottish referendum will be held on September 18. Excluding the “don’t knows” the latest YouGov poll (from Sept 2-5) shows the Yes vote at 51 per cent, compared to 49 per cent for the No camp.
Michael Saunders of Citi wrote: “A “Yes” vote would create considerable economic and political uncertainties for the UK, which would not fade quickly, in our view.
“There are uncertainties over the currency arrangements and fiscal position of an independent Scotland, over the large Scotland-based banks, and over Scotland’s future EU membership.”
