After weeks of speculation the results are in, and the currency market has responded accordingly. The Pound to Euro (GBP/EUR) and Pound to US Dollar (GBP/USD) exchange rates jumped early in European trading as investors breathed a sigh of relief after waking to the news that Scotland voted against independence.
With the vote split 55% against independence and 45% for, the United Kingdom will survive.
In the end, the outcome was less close than opinion polls had led us to believe, but an overwhelming number of people did turn out to vote and it seems a foregone conclusion that the UK we know now will change considerably.
The GBP/EUR pairing briefly achieved a two-year high of 1.2800 while the GBP/USD pairing pushed back up to 1.6524.
The Pound was also stronger against the majority of its other currency rivals.
Speaking shortly after the final votes had been counted, Prime Minister David Cameron asserted; ‘Like millions of other people, I am delighted. As I said during the campaign, it would have broken my heart to see our United Kingdom come to an end. And I know that sentiment was shared by people, not just across our country, but around the world because of what we’ve achieved together in the past and what we can do together in the future.’
The Pound Sterling to Euro (GBP/EUR) exchange rate hit a high of 1.2800.
Sterling is likely to continue trending in the hours ahead.
As stated by currency strategist Phyllis Papadavid; ‘Given the resounding result for the ‘no’ vote, it should settle a lot of the uncertainty that markets have been experiencing with regard to Sterling. Obstacles are cleared for Sterling now to really go back to fundamentals.’
The Euro, meanwhile, was pressured yesterday as the effectiveness of the European Central Bank’s latest attempt to bolster the flagging Eurozone economy was put in doubt. The ECB’s first offering of Long Term Refinancing Operations were received tepidly by banks, with only 82.6 billion Euros worth of funding being taken on board.
If demand for the liquidity-boosting loans doesn’t increase, the ECB may have little choice but to engage in full scale quantitative easing.
The Pound Sterling to US Dollar (GBP/USD) exchange rate was able to push higher by around 2 cents in reaction to the referendum, with the Pound trouncing the ‘Greenback’ in spite of yesterday’s impressive US employment figures.
On Thursday US initial jobless claims printed at their lowest level for around eight years, adding to the case for a sooner-rather-than-later interest rate increase and helping the US Dollar advance on some of its rivals.
Pound Sterling (GBP) Exchange Rate Forecast
This week the UK has had to deal with a rammed economic calendar, but there are no UK reports to be aware of today.
The impact of the Scottish referendum is likely to be felt throughout trading however, with the Pound ending the week in a markedly stronger position against the majority of its peers.
Next week the UK’s public finance report is the only piece of influential domestic data worth focusing on.
Pound (GBP) Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Pound Sterling,
,US Dollar,1.6457,
Pound Sterling,,Euro,1.2764,
Pound Sterling,,Australian Dollar,1.8379,
Pound Sterling,,New Zealand Dollar,2.0221,
US Dollar,,Pound Sterling,0.6082,
Euro,,Pound Sterling,0.7833,
Australian Dollar,,Pound Sterling,0.5448,
New Zealand Dollar,,Pound Sterling,0.4947,
[/table]
