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Scotland votes 'NO' to independence - Pound Rallies

The majority of Scotland voted 'No' to independence in the Scottish referendum to leave the United Kingdom.

Over the last few weeks, sterling has fallen on fears that Scotland would vote in favour of leaving the UK. After the no vote, the pound has hit a 2 year high against the Euro and a 2 week high against the US Dollar. At the time or writing, GBPEUR is currently at 1.2764 and GBPUSD at 1.6458.

Interbank GBP Forex Rates (07:48 UTC)

GBPUSD 1.6458
GBPEUR 1.2764
GBPAUD 1.8377
GBPCAD 1.8030
GBPINR 100.0920
GBPZAR 18.2096

For more information on the Scottish 'No' vote see the latest news from around the web below:

Scottish referendum: Pound and shares rise on 'No' vote

The FTSE 100 share index also opened higher, rising 0.7% to 6,860.

In Asian trade, sterling jumped 0.43% to 1.2743 euros. The pound also jumped nearly 0.8% to $1.6525 against the US dollar, before falling back slightly.

Meanwhile RBS confirmed it would not be moving its registered head office now that independence had been rejected.

"The announcement we made about moving our registered head office to England was part of a contingency plan to ensure certainty and stability for our customers, staff and shareholders should there be a 'Yes' vote," the bank said.

"That contingency plan is no longer required. Following the result it is business as usual for all our customers across the UK and RBS."

In a statement, Lloyds Banking Group said: "The group is proud of its strong Scottish heritage and remains committed to having a significant presence in Scotland. We remain fully focused on supporting households and businesses in Scotland as well as right across the rest of the UK."

Over the past couple of weeks the pound had fallen on fears that Scotland would vote in favour of independence.

Jeremy Cook, economist at World First said: "The obvious risk to the currency markets was a yes and that would have caused a big sell off. Now the markets will go back to concentrating on the fundamentals of the UK economy."

'Focus on growth'
Shares prices in London opened higher, with RBS up more than 3% and Lloyds Banking Group up nearly 2%.

Brenda Kelly from IG Index said: "Investors in these firms will be relieved that management will be able to devote their time to business performance, rather than fretting about contract changes or headquarter moves.

"There is still uncertainty, primarily over the new changes to voting on English issues, but these are of importance primarily to politicians and less so to markets," she added.

The boss of Aberdeen Asset Management, Martin Gilbert, who had previously said that Scotland "would prosper" as an independent county, also welcomed the end to the uncertainty of the last few months.

"Scotland has long been a world leader in business sectors such as oil and gas, whisky and investment and the task now is to grow the rest of the economy with the strong support of politicians of all parties," said Mr Gilbert.

The business lobby group IoD Scotland said the most important thing now was for the country to get together and focus on growth.

"Perhaps the most urgent challenge for our politicians will be to unite Scotland - no matter which way people voted - and focus on building an enterprise culture that will generate the wealth that is desperately needed," it said.

'Disruption avoided'
Analysts also said that the result reduced the risk of the UK leaving the European Union.

"Scottish residents are more in favour of remaining in the EU, compared to the rest of the UK where the majority favour an exit. Overall, major disruption has been avoided and focus can now return to building on the strong economic recovery in progress, " said Azad Zangana, economist at Schroders.

"The Bank of England is now likely to press ahead with raising interest rates early next year in the absence of political uncertainty," he added.

Stock markets in Asia were mostly higher, taking their cues from Wall Street.

US stocks rose on Thursday, one day after the central bank - the US Federal Reserve - said it would maintain its pledge to keep interest rates low. Those comments helped to lift the Dow Jones Industrial Average and the S&P 500 index to record highs.


Pound sterling jumps on Scottish result

The British pound has hit a two-year euro peak but trimmed gains, with official results showing Scotland has rejected independence.

In Asian deals on Friday, the euro tumbled to 0.7810 pounds on initial returns pointing to a victory for the "No" camp. That was the lowest level since July 2012 and compared with 0.7882 late in New York on Thursday.

At the same time, sterling jumped to a two-and-a-half-week peak at $1.6525, and also hit a six-year high of 180.71 yen.

However, early on Friday morning, the euro stood at 0.7840 pounds, while the pound pulled back to $1.6450 and 179.42 yen.

"Scotland has voted against independence overnight in a move that has removed a great weight from the shoulders of sterling," said economist Simon Smith at trading group FxPro.

Preliminary results showed the "No" camp was ahead by 55.42 per cent to 44.58 per cent for the "Yes" camp, with 31 out of 32 local areas counted.

The referendum leaves the United Kingdom intact but also opens the door to wider autonomy following a huge turnout.

"It's a relief rally (for the pound), and had there been a 'Yes' I think a drop to below $1.60, possibly even $1.55 as well, (would have been possible) given the uncertainty that would come into the equation, regarding currency, debt splits, division of assets and the question over the validity of a 2015 general election," said analyst Chris Beauchamp at trading firm IG.

He added the pound moved higher due to increasing expectations of an interest rate increase from the Bank of England (BoE) next year.

"The 'No' vote arguably makes a rate hike more of a possibility in 2015, given that separation negotiations would have stayed the BoE's hand on rates, so this is why the pound is seeing another move higher against the euro," Beauchamp said.


Pound rallies as Scotland stays in UK

Friday 08:15 BST. Sterling is rallying and the London stock market is posting strong gains after a majority of Scots voted to stay in the UK.
Adding to London’s positive tone is strength across global equities after Wall Street hit a fresh record, with investors expressing content on the likely timeline for the Federal Reserve to tighten policy.

US 2-year Treasury yields are up 2 basis points to a three-year high of 0.59 per cent, but US index futures still show the S&P 500 advancing another 7 points to 2,018 ahead of Alibaba’s record-breaking IPO on the New York Stock Exchange.
The FTSE Asia Pacific index is climbing 0.5 per cent, after Tokyo jumped to its highest level since November 2007. Industrial commodities are steady, with copper up 0.1 per cent to $6,844 a tonne and Brent crude adding 5 cents to $97.75 a barrel, as recent concerns about waning global demand fade.

Much attention is on the UK, however. The FTSE 100 in London is rising 0.6 per cent and the pound is posting gains against a range of currencies as traders express relief that Scotland will not leave the UK.
Some investors had feared that a vote to depart would trigger a long period of political and economic uncertainty and might have ultimately resulted in the UK leaving the European Union.

The pound is up 40 pips to $1.6440, while against the euro it has hit its highest point since mid-2012, and briefly broke through the Y180 level against the broadly weak Japanese yen for the first time since late 2008.
Currency option traders are taking off protection for a sharp fall for the pound. The sterling 1-week implied volatility gauge, which touched 17.2 on Tuesday, is down to 6.2.

Simon Derrick, chief market strategist at BNY Mellon, said this “seemed an appropriate response” by the forex market, partly “reflecting important questions over what the political fallout will prove to be in all four capitals of the Union”.
“In particular, while issues over responsibility for share of the national debt will have been put to bed..., the focus for many will now turn to the May 2015 General Election. Investors will probably wish to get a clearer idea over how the recent campaign has impacted support for the main parties in Westminster as well as whether this makes calls for a 2017 referendum on EU membership more or less likely.”

Howard Archer, chief UK and European economist at IHS Global Insight, said: “Economic fundamentals still look broadly supportive to the pound, particularly against the euro. Furthermore, the no vote for independence removes one factor that could have delayed the Bank of England raising interest rates.”

The policy-sensitive 2-year gilt yield is up 4 basis points to 0.92 per cent, a two-month high.

The euro is down 0.3 per cent versus the dollar at $1.2891 as investors continue to digest the outcome of the European Central Bank’s first offer of cheap four year loans. German 10-year Bund yields are up 2bp to 1.11 per cent as demand for havens eases.
Madrid’s bonds are rising, pushing 10-year yields down 5 basis points to 2.23 per cent as the Scots’ no vote is seen damping the ardour of Catalan and Basque separatists. Spain’s Ibex equity index is advancing 1.4 per cent.

Stock markets in Asia were generally firmer after Wall Street’s gains, with the Shanghai Composite up 0.6 per cent, the Hang Seng in Hong Kong adding 0.8 per cent and Australia’s ASX 200 climbing 0.3 per cent.

The standout outperformer was Tokyo, where the Nikkei 225 surged 1.6 per cent to a near-seven year high after Prime Minister Shinzo Abe said he would quickly reform the country’s $1.2tn pension fund so it could buy more stocks.
Japanese shares also got a lift by the yen’s slide to a fresh six-year low of Y109 per dollar as investors see the Bank of Japan continuing its ultra-loose strategy.

Gold is down $2 to $1,223 an ounce, an eight-month low, as rising US bond yields weigh on the precious metal.

Additional reporting Josh Noble and Patrick McGee in Hong Kong

Author: Jamie Chisholm, Global Markets Commentator


Pound Regains Crown as World-Beater After Scotland Vote

The pound reclaimed its crown as the best-performing major currency of the past 12 months after Scotland voted to keep the U.K.’s 307-year-old union intact.

Sterling has appreciated against all 31 of its most-traded peers in the past year, having trailed South Korea’s won and India’s rupee as the top performer as recently as yesterday. The pound is set for its biggest two-day advance versus the dollar since February as 55 percent of Scottish voters supported the “no” campaign, compared with 45 percent backing independence.

“Given the resounding result for the ‘no’ vote, it should settle a lot of the uncertainty that markets have been experiencing with regard to sterling,” Phyllis Papadavid, a senior global-currency strategist at BNP Paribas SA in London, said by phone. “Obstacles are cleared for sterling now really to go back to fundamentals.”

The currency has dominated the two-year referendum debate, with all three of Britain’s main political parties rejecting the idea of letting Scots use the pound after separation. While the Better Together campaign’s victory means there’s no need for further debate on sterling, uncertainties remain. Prime Minister David Cameron today pledged more policy making powers for Scotland, as well as political change in the rest of the U.K.

The pound rose as much as 0.8 percent today to $1.6525, the strongest level in more than two weeks, and was up 0.3 percent at $1.6455 as of 7:44 a.m. in London. BNP Paribas’s “fair-value estimate” for sterling is $1.76, Papadavid said.


Britain’s currency has added 1.1 percent versus the dollar since Sept. 17. It appreciated 0.5 percent today to 78.39 pence per euro, after reaching 78.10, a level last seen in July 2012.

The pound has strengthened more than 10 percent since sliding to $1.4814 on July 9, 2013, the lowest level since 2010, and has gained 2.6 percent versus the greenback in the past 12 months.

Economists have in recent weeks forecast that a vote to reject independence would boost the pound. Twenty-one out of 31 economists surveyed by Bloomberg from Sept. 5-11 predicted sterling would trade 2 percent to 5 percent higher against the dollar a month after a “no” vote, with four forecasting gains of 5 percent to 10 percent. A nationalist victory would mean a 5 percent to 10 percent slide, 19 of the respondents said.

Hedge funds and other large speculators boosted their bullish pound bets by a net 17,279 futures contracts in the week ended Sept. 9, the biggest increase this year, data from the Commodity Futures Trading Commission in Washington show.

Pound Volatility

Today’s advance sent the U.K. currency to the strongest level against the dollar since Sept. 2, when price swings for the pound increased after a YouGov Plc poll for the Times and Sun newspapers showed the independence campaign gaining ground. The pound touched its lowest level in about 10 months on Sept. 10 after a separate YouGov poll projected the secession movement was ahead for the first time this year.

“Cable is so far making up roughly what it had lost since early this month -- which was largely risk premium,” said Ulrich Leuchtmann, the head of currency strategy at Commerzbank AG in Frankfurt, referring to the pound-dollar pair. “That’s roughly it with the effect of the referendum on the pound. Markets probably will now start to concentrate again more on the usual drivers.”

Monthly Decline

The pound is still 1 percent weaker against the dollar in September, set for a third month of declines. Sterling dropped this month after some economic data fell short of analyst estimates, and as an increasing emphasis from the Bank of England on anemic wage growth prompted investors to push back expectations for the first interest-rate increase since 2007.

Forward contracts based on the sterling overnight interbank average, or Sonia, show investors pushed back bets on a 25 basis-point increase in U.K. borrowing costs to May from, as recently as last month, February. A basis point is 0.01 percentage point.

There’s an 80 percent chance the U.S. Federal Reserve will raise its near-zero benchmark rate by its September 2015 meeting, futures data show.

“You have to presume that, when the dust settles and we start to look back at the relative fundamentals between the U.K. and other currencies, particularly the U.S.,” sterling will drop, said Greg Gibbs, the head of Asia-Pacific markets strategy at Royal Bank of Scotland Group Plc in Singapore. “There is a race now between the Fed and the Bank of England, and I wouldn’t be surprised in the weeks ahead that the Fed moves ahead in that race and the pound starts to head lower.”

Edinburgh-based RBS predicts the pound will end the year at $1.60.

Gains Capped?

Other strategists also predict further gains in the pound may be limited, with sterling already giving back some of today’s advance. Britain’s currency has risen to meet the median year-end forecast of 62 analysts and economists in a Bloomberg survey, after lagging behind the estimate by 7 cents on Sept. 8. That was the biggest shortfall in almost three years.

“The relief that the currency won’t have to cope with the uncertainty of Scottish independence means the pound has rallied to remove the earlier political-risk premium,” HSBC Holdings Plc analysts, including global strategy head David Bloom, said in a client note. “But the shine had already begun to come off sterling. Any disappointment on growth, or renewed focus on the large current-account deficit, could still weigh on the currency.”

Authors: David Goodman and Lukanyo Mnyanda

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