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Pound Jumps to 10-Week High as ‘Scoxit’ Worries Fade By

Pound Jumps to 10-Week High as

© Reuters.

By Yasin Ebrahim – The pound held the bulk of its gains Tuesday after jumping to a 10-week high against dollar, riding a wave of post-election optimism amid fading worries over a Scottish referendum on whether to leave the U.K.

rose 0.19%, to $1.4146. 

“[T]here won’t be a (legal) referendum on Scottish independence anytime soon,” Action Economics said, after the Scottish National Party fell short of gaining an overall majority following the national election last week.

“It should be noted that polling suggests that most people in Scotland don’t want a new referendum on independence and that only 36% think the SNP has a mandate for a referendum versus 46% who don’t,” it added.

But results of the election were not only a positive for those opposed to another Scottish referendum, as U.K. Prime Minister Boris Johnson’s Conservative party firmed up their support in the local elections.

With the risk of a “Scoxit,” in the rearview mirror, the pound will likely continue to be supported by signs of recovery as the U.K. continues to ease Covid-19 restrictions.

“The market shows its relief and the positive sentiment caused by the slow opening of the British economy and society is also supporting sterling,” Commerzbank (DE:) said.  

Traders will get a sense of the pace of the U.K. recovery on Wednesday, with the release of the first-quarter GDP data.

But with first-quarter GDP expected to fall 6.1% year-on-year and 1.6% for the quarter, this “might provide a dampener to this optimism and to sterling though,” Commerzbank added.

“Of course it constitutes a backward glance but it illustrates nonetheless how hard the economy was hit by the strict lockdown and that a lot of catching up is still required.”

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