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Scottish independence: City shows confidence in No vote as pound bounces back Scottish independence: City shows confidence in No vote as pound bounces back
(35 minutes later)
The pound hit a two-year high against the euro today as the City rushed to gamble on a No result while Scots voted on whether they wanted to stay part of the UK.The pound hit a two-year high against the euro today as the City rushed to gamble on a No result while Scots voted on whether they wanted to stay part of the UK.
In the past two weeks, most polls about the vote, which closes at 10pm, have indicated that those supporting independence have been slightly behind those wanting to keep the union, but given the high number of people who are still undecided, it has remained too close to call.In the past two weeks, most polls about the vote, which closes at 10pm, have indicated that those supporting independence have been slightly behind those wanting to keep the union, but given the high number of people who are still undecided, it has remained too close to call.
In recent weeks, there have been warnings from major banks that a Yes vote could lead to the collapse of the pound.In recent weeks, there have been warnings from major banks that a Yes vote could lead to the collapse of the pound.
"The pound's reaction clearly suggests investors are convinced that the Scots will vote to stay in the union," Fawad Razaqzada, technical analyst at traders Forex.com, told AFP.
"To what degree they will vote against being independent will determine the future direction of the pound. If it is a very tight No then we could see the pound lose some ground once the initial euphoria fades."
"On the other hand, a decisive No could send sterling skyrocketing. Needless to say, a Yes vote would almost certainly result in a massive drop."
Earlier this month it emerged that major global investors have been pulling billions out of the British economy due to fears that Scotland could vote for independence.Earlier this month it emerged that major global investors have been pulling billions out of the British economy due to fears that Scotland could vote for independence.
Nobel Prize-winning economist Paul Krugman also warned that a vote for Scottish independence would be catastrophic for the country. “The risks of going it alone are huge,” Mr Krugman warned in his New York Times column on 7 September. “You may think that Scotland can become another Canada, but it’s all too likely that it would end up becoming Spain without the sunshine.”Nobel Prize-winning economist Paul Krugman also warned that a vote for Scottish independence would be catastrophic for the country. “The risks of going it alone are huge,” Mr Krugman warned in his New York Times column on 7 September. “You may think that Scotland can become another Canada, but it’s all too likely that it would end up becoming Spain without the sunshine.”
International investors eyeing the situation have also expressed concern about other similar political situations, most notably the Catalans’ demands for independence in Spain.  International investors eyeing the situation have also expressed concern about other similar political situations, most notably the Catalans’ demands for independence in Spain.
Today, sterling rose to $1.6388, well above the 10-month low of $1.6051 it struck last week. It has bounced back from these lows as investors trimmed bets against it after most polls in Scotland showed those in support of the Union were ahead.Today, sterling rose to $1.6388, well above the 10-month low of $1.6051 it struck last week. It has bounced back from these lows as investors trimmed bets against it after most polls in Scotland showed those in support of the Union were ahead.
The pound also gained against the euro, which fell to 78.53p, its lowest since August 2012.The pound also gained against the euro, which fell to 78.53p, its lowest since August 2012.
The common currency was also hit after the European Central Bank handed out a below-forecast €82.6 billion (£65.19 billion) in its first offering of four-year loans. Traders said the lower take-up would keep pressure on the ECB to opt for quantitative easing.The common currency was also hit after the European Central Bank handed out a below-forecast €82.6 billion (£65.19 billion) in its first offering of four-year loans. Traders said the lower take-up would keep pressure on the ECB to opt for quantitative easing.
"It seems people are growing reasonably confident of a No vote in Scotland," said Ian Gunner, portfolio manager at Altana Hard Currency Fund."It seems people are growing reasonably confident of a No vote in Scotland," said Ian Gunner, portfolio manager at Altana Hard Currency Fund.
"The risks are if it goes the other way, and that is one of the reason why overnight implied vols are still trading higher.""The risks are if it goes the other way, and that is one of the reason why overnight implied vols are still trading higher."