Sterling surged to multi-year high against the euro and peaked at 1.6525 against the US dollar as Scotland voted to remain in the U.K. This morning’s result puts to rest two years of uncertainty which rocked the markets in the past month as the polls suggested the decision would be extremely close. The increasing uncertainty drove sterling weaker against its major trading partners; but, these losses have mostly been unwound over the past 48hrs as momentum gathered behind the “No” campaign before we saw confirmation of the decision this morning with Scotland rejecting independence by 55% to 45%.
As the Scottish referendum question comes to a close, the focus for sterling will shift back to the Bank of England and when the central bank may look to raise interest rates. This week, the minutes from the latest meeting of the Bank of England’s Monetary Policy Committee showed two members continuing to back an increase in interest rates whilst unemployment fell to a six-year low helping to boost sterling – we will have to see if there is a change in sentiment from some of the other voting members at next month’s meeting.
With little economic data released today, we are likely to see a continued market reaction to the referendum result.