Pound struggles on prospect of new Scottish independence vote

Sterling fell to an almost nine-month low versus the euro on Tuesday after Scotland's First Minister Nicola Sturgeon said she was set to share details on plans for a new independence referendum.


Reuters | London | Updated: 14-06-2022 19:03 IST | Created: 14-06-2022 18:28 IST
Pound struggles on prospect of new Scottish independence vote
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Sterling fell to an almost nine-month low versus the euro on Tuesday after Scotland's First Minister Nicola Sturgeon said she was set to share details on plans for a new independence referendum. Sturgeon said she was nearly ready to give more details on how Scotland's devolved parliament could move ahead with a new independence referendum without the consent of the British government.

British Prime Minister Boris Johnson and his Conservative Party, which is in opposition in Scotland, strongly oppose a referendum, saying the issue was settled in 2014 when Scots voted against independence by 55% to 45%. Versus a strengthening euro, the pound fell 1% to 86.62 pence at 1245 GMT, touching its lowest level against the single currency since July last year.

After briefly rising against the U.S. dollar, the pound fell 0.5% to $1.2075, near its lowest since the start of the pandemic in March 2020. "If I were to isolate the (pound) move lower down to one event, I’d most probably say that the Scottish independence risk was the straw that broke the camel's back," said Simon Harvey, head of FX analysis at Monex Europe.

"The impact of the announcement by Nichola Sturgeon was inflated by the sheer pressure the pound is under from a multitude of factors". The Sterling has weakened more than 10% against a robust dollar since the start of the year amid a grim outlook for the economy and political instability in Britain. Data on Tuesday showed the UK jobless rate ticked higher in the first increase since late 2020.

Britain's growth is already seen among the weakest for rich countries in the coming months, and there is uncertainty over how fast the Bank of England, which is expected to raise interest rates again on Thursday, can tighten policy this year to tame inflation without further hurting the economy. Jane Foley, head of FX strategy at Rabobank in London, said the pound continued to be vulnerable as "the worsening growth outlook remains a thorn in the side of sterling".

Data this week showed Britain's economy unexpectedly shrank in April, adding to fears of a sharp slowdown. On Monday, Britain also published plans to override post-Brexit trade rules for Northern Ireland by scrapping checks and challenging the role played by the European Union's court in a new clash with Brussels.

"News that the Johnson government want to rewrite the Northern Ireland protocol is another negative for the UK investment backdrop," Foley added.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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