A.Weber: what to expect from the Scots?
By Alex Weber
On Thursday and Friday the global markets focus on Scottish referendum - this is a major bearish-risk factor for the pound. The vote itself takes place on Thursday, but preliminary results will be available only on Friday, around 6:00 GMT.
The market uncertainty was high since the beginning on September, but the majority still doesn’t believe that Scotland could leave the United Kingdom. Pound extends the recovery from the $1.6050 low hit on Sep. 10 as the most recent polls showed the “No” voters were slightly ahead. However, the final result will mostly depend on the choice of the undecided respondents.
The general market optimism could offer more support for GBP/USD on Thursday, so I hold a tiny LONG from $1.6310 targeting $1.6390. Resistance is seen at $1.6400 and $1.6460.
If Scotland decides to stay in the United Kingdom, recovery could extend well above the $1.6460 area. However, should Scotland choose Independence, we’ll see a massive GBP selloff. Dynamics of the currency decline will strongly depend on the conditions of the breakup.