Sterling weakens further on Scottish Yes vote prospects

Fears of a win for Scottish independence continues to hit sterling with the currency falling further overnight.

The pound has been sliding from $1.66 at the beginning of the month. It took a 1.3 per cent tumble yesterday – a 10-month low of  $1.61 – after the Yes camp took the lead in referendum polling.

Overnight, sterling has slid further to $1.608. The Sunday Times/YouGov poll put the yes voters at a 51 per cent advantage and the unionists at 49 per cent.

The FTSE 100 fell 0.9 per cent on the news, while 10-year gilt yields increased 2 basis points to 2.48 per cent.

FXPro senior analyst Angus Campbell says the US dollar is now near a four-year high against the pound and euro, mostly because of the European currency pair’s weakness.

“Today, focus will remain on sterling, not only from a geopolitical point of view, but a data one too as we see industrial and manufacturing figures released this morning,” he says.

“There’s also a speech by BOE Governor Mark Carney to the TUC Congress although he’s unlikely to give anything away in respect of monetary policy.”

Capital Economics says a Yes vote would likely push the pound below the firm’s year-end forecast of $1.60.

“Admittedly, sterling has already fallen from above $1.70 two months ago to below $1.62 today, so it is tempting to think that a ‘yes’ vote is now discounted,” it says. 

“But most of the drop in the exchange rate since mid-July can be attributed to a shift in perceptions of the relative prospects for monetary policy in the UK and the US, rather than to the future of the UK itself.”