Scottish Independence issue likely to bring market volatility
After months of the issue of Scottish independence being widely ignored by the markets, as we approach crunch time the pressure is beginning to show on the Pound.
A Narrowing Gap
Yesterday saw construction growth unexpectedly accelerate in August but this was unable to help Sterling as a YouGov poll showed the lead for Scotland staying as part of the UK is narrowing. Markets don’t like unpredictability and, up until now, it has appeared that there is no threat of Scotland leaving the UK, but this is starting to change.
There are fears that an independent Scotland will lead to a higher debt burden to the UK and no one really knowing what will happen to the Pound and the UK stance in the EU if Scotland were to gain independence hardly adds any positivity to Sterling.
Expect to see a great deal of volatility in the next couple of weeks before the Referendum as markets look to opinion polls for guidance. History has shown us that such votes tend to be very emotive and well turned out affairs, so results are often uncertain.
12 Consecutive Months
In other news, in Australia, the likelihood of any interest rate hikes in the near future have been downplayed by RBA Governor Stevens on the back of them holding the interest rates at 2.5% for the 12th consecutive month. They seem to be quite happy at that level and don’t want to risk further inflating house prices.
The major data out today is PMI from Spain, Italy, France, Germany, the Eurozone and the UK, European retail sales, US mortgage applications, the Fed’s beige book and interest rate decision and statement from Canada.