British pound rallies as market bets Scotland will stay

GMT 16:50 2014 Thursday ,18 September

Arab Today, arab today British pound rallies as market bets Scotland will stay

British pound
London - AFP

The British pound reached a two-year high point against the euro on Thursday as markets increasingly bet that Scotland will vote in favour of remaining part of the United Kingdom.
Sterling reached 78.53 pence against the euro, the highest level since August 20, 2012. The British currency also struck a two-week high against the dollar, at $1.6409, in afternoon trading in London.
"The pound's reaction clearly suggests investors are convinced that the Scots will vote to stay in the union," said Fawad Razaqzada, technical analyst at traders
"To what degree they will vote against being independent will determine the future direction of the pound. If it is a very tight 'No' then we could see the pound lose some ground once the initial euphoria fades."
He told AFP: "On the other hand, a decisive 'No' could send sterling skyrocketing. Needless to say, a 'Yes' vote would almost certainly result in a massive, massive drop."
After months when it looked like the independence camp could not win, a surge in support in the final two weeks has left pollsters warning the outcome is too close to call as Scots voted on Thursday.
Financial markets, however, appear more certain regarding the outcome.
The pound last week slumped to a 10-month dollar low on fears over the impact of possible Scottish independence.
First Minister Alex Salmond and his Scottish National Party (SNP) want Scotland to continue using the pound and enter into a formal, euro-style monetary union with what would remain of the UK.
All three main political parties in Westminster reject any such an arrangement -- but Salmond also argues that Scotland cannot be stopped from using the pound, regardless of their opposition.
Nothing would stop an independent Scotland from using the pound without London's agreement as such, but this would effectively mean that monetary policy was set by the Bank of England, even though it would not be the central bank or lender of last resort.


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