The Scottish have voted No, rejecting independence and bringing new confidence to the Union and to sterling.
The vote was close but with more differential than predicted, No at 55.4% and Yes at 44.6%, both sides understood that the democratic process had prevailed due to a 84% turn out of voters.
The pound GBPUSD strengthened as initial results from the voting were announced, rising from around $1.6400 to go as high as $1.6526 by the time the polls closed. The spike was not as pronounced as many strategists had predicted as some hoped for a push on the pound above its Sept. 1st close of $1.6605.
However, in the year’s run up to the referendum, uncertainty in the markets took sterling down to ten month lows, making the spike more pronounced against a trail of past depression, pushing it to a two-year high against the euro trading as low as 78.10 pence, and to a two-week high against the dollar. Sterling’s strength against the US dollar, though reaching $1.65, fell again but kept a proportion of its increase to one third on the day at $1.6460.
Exchange markets were not the only trading instrument affected by the choice to stay in the Unite Kingdome and in the GBP. With the risk of Britain’s exit from the European Union reduced, came the consequent reduction of risk for markets and for Scottish companies based on the FTSE 100. The result saw shares rise in these companies with Standard Life, Royal Bank of Scotland and Lloyds all seeing price hikes alongside their counterpart market-based UK interest rates. Gilt markets were also relived as yields on 2-year and 10-year gilts rose in early trade by around 2 basis points to 0.90 percent and 2.61 percent respectively.
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