The UK local and regional elections on Thursday 6 May have rekindled interest in the sensitive issue of Scottish independence. The uncertainty surrounding a vote would be bad for the pound, notes Kit Juckes, Chief Global FX Strategist at Société Générale.
EUR / GBP can only move below 0.87 temporarily
“Should the pro-independence parties win a strong majority in the new Scottish Parliament, First Minister and SNP leader Nicola Sturgeon will likely call for a second independence referendum as soon as the Covid-19 pandemic is behind us.”
“The possibility of a second Scottish referendum reinforces our belief that the EUR / GBP will not return to pre-Brexit levels for many years.”
“Our year-end forecast for the EUR / GBP is still at 0.87, where it is still trading today. A big win for the SNP would certainly not be a reason to shift this forecast downwards, even if the British MPC announced a slowdown on Thursday The pace of asset purchases is signaled. “