Scotland remains in the UK after No vote prevails

Claire Hogarth19/Σεπ/2014Currency Updates

Today’s foreign exchange markets will inevitably be dominated by the news coming out of Scotland as, after months of campaigning, debating and opinion polls, the country voted No to independence from the United Kingdom. Since the polls opened at 7:00am yesterday morning around 4 million people cast their vote. Ballots were counted throughout the night ending in Aberdeen at 6am this morning and not long after it was announced that Alex Salmond and the Scottish National Party had failed to win over the remaining undecided voters that it required.


In the lead up to the referendum result the pound strengthened significantly verses both the dollar and the euro by 0.8% and 0.6% respectively with other substantial gains against most of its 16 major peers as markets favoured a win for the No campaign. Sterling reached its strongest level against the euro, since August 2012, at around 1:30pm on Thursday with volatility of cable increasing by as much as 33%, the highest level since the coalition government was formed in May 2010. The market shrugged off a report by the CBI which showed Britain’s manufacturing sector is losing strength.

As the referendum results filtered through early this morning the markets immediately responded. The pound strengthened, reaching a ten day high against the dollar with cable rising by 2% within a 24 hour period. Similarly against the euro, sterling experienced an immediate appreciation of around 0.8%, although the euro regained ground as the night went on. The market reaction was relatively low key after the last few days where it was clear the No campaign was in a strong position for victory. In the end it was a more comfortable victory for No than had been predicted, gaining around 55% of the votes.


The single currency continued to find itself under pressure on Thursday, declining sharply and reaching new lows against the dollar. This after the ECB had announced that the TLTRO programme, aimed at stimulating the Eurozone economy, had only lent €82.6 billion to Eurozone banks, far below what economists had predicted. This perhaps suggests that the programme may have a limited impact on boosting credit availability and increasing growth.

The euro did, however, bounce back verses the greenback overnight rising by 0.8% on the back of the referendum result.


The dollar gained 0.2% against the yen reaching a new six year high as markets opened yesterday, climbing to levels not seen since the collapse of Lehman Brothers in 2008. The greenback also headed towards its highest closing level in four years verses its major peers after the Fed’s hawkish interest rate announcement on Wednesday. The Bloomberg Spot Index, which tracks the greenback against ten major currencies, showed a 0.3% increase, with the dollar predicted to continue its good form while many other major currencies remain structurally weak.

Speaking in Washington at a conference on consumer confidence Yellen, Chair of the Federal Reserve, said that a Fed survey showed that a large number of families are “extraordinarily vulnerable” with limited assets to fall back on as a result of the financial crisis. Yellen noted that while there had been improvements in the economy, the job market still faces a number of problems, most significantly weak wage growth.

Rest of the world

In other news, the Swiss National Bank, in line with expectations, maintained its benchmark interest rate of 0% where it has stood since August 2011. In a statement released yesterday the SNB reiterated its commitment to maintaining its pegged exchange rate of 1.2 against the euro, stating that the economic outlook has deteriorated considerably. Immediately after the announcement the value of the Swiss franc increased by 0.4% against the dollar.

No major announcements or releases today outside of the referendum, however, Canada will be releasing its consumer price index for August at 1:30pm London time with its value expected to remain consistent with last month at 2.1%, meaning the market impact may be muted.


Written by Claire Hogarth

Marketing Executive at Ebury. English Literature graduate from the University of York and a motivated professional.