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Scottish independence: Pound bounces back heavily after YouGov gives final prediction to No campaign
Scotland votes: Markets rejoice and pound bounces back as nation rejects independence
(about 7 hours later)
The pound leaped in the minutes after the YouGov post-election "final prediction" suggested a 54 per cent victory for the No vote in the Scottish referendum.
The financial markets rejoiced through the night at the pending victory of the No campaign in the Scottish referendum.
Traders saw sterling shoot up as the markets reacted with relief to weeks of uncertainty about the future of the UK economy. Although opinions among investors and economists were mixed about the long term impact of a secession vote, the view was almost unanimous that the uncertainty in the shorter term would be extremely unsettling.
The pound first surged at 10.30 last night after the YouGov poll predicted the result and it continued to rally through the night to be back at levels not seen for three weeks-since before the shock Sunday Times poll which suggested the Yes camp would win.
Many investors had already begun taking increasingly large bets on a No, particularly in the currency markets, where the pound has been gaining today.
Brenda Kelly, a trader at IG Index in London said: "It has been a very busy night and we are seeing a very big relief rally."
Justin Pugsley, a currency analyst at brokers MahiFX said: “The pound is rising strongly now. If we do get a 'No' tomorrow, I’m sure we’ll get something of a relief rally. It will be a real relief for all investors, I think. Make no doubt, though, if this poll proves wrong and we get a 'Yes', the pound will really plunge.”
Speaking shortly after the Glasgow result this morning showed a Yes vote was inevitable, she said: 'We're now expecting the FTSE-100 to surge when the market opens later today. It could rally at least 1 per cent in the opening minutes to levels above 6880 points. You could even see the FTSE pushing to new records. We're near 14 year highs already so we could soon be pushing to the 6930 all time high from 1999."
Hedge funds, which always tend to have the biggest appetite for risky bets, piled in particularly heavily throughout the afternoon, with global data showing they have more bets on a sterling rise now than at any time since July – before the huge momentum in the Yes campaign of recent weeks.
In New Zealand, Simon Coulter, a currency broker at Mahi FX, said: "It has been one of the busiest Asian trading sessions I've seen for many months, possibly years. The pound has been rallying really hard. There has been a mood of great relief for investors. This status quo result is seen as being good for the financial system."
However, at IG Index, trader David Hale said: “The pound has risen since the YouGov poll but I have to say more of our clients have seen that rally and are selling into it. In other words, they're betting YouGov is wrong.”
The pound, which had been below $1.64 before the 10.30pm YouGov poll, shot up to $1.6444 within minutes of that prediction and spent the rest of the night bouncing higher at above $1.65 despite dipping after the Dundee and West Dumbartonshire results.
Sterling had fallen as low as $1.6052 on 10 September after a shock YouGov poll put the nationalists in front for the first tim. But it bounced back as Westminster’s leaders upped the political rhetoric. This evening it had risen to just shy of $1.64 before it shot up to $1.6444 in the wake of the prediction. That marked a gain on the day of more than half a cent.
"It was after the Glasgow result that we have seen investors push the pound higher again,“ said Ms Kelly. "It's a massive relief rally coming in."
Commerzbank analysts have predicted the pound would rise to $1.67 by the end of the year in the event of a No, as investors put their money back into the UK in recognition of its status as one of the fastest growing western economies.
While share prices and UK Government bonds, known as gilts, will react when trading begins in London at 8am, through the night it will be the pound-dollar market that demonstrates the sentiment of global investors.
Usually currencies trade 24 hours a day, switching from London to New York to Asia. But due to the enormous concerns of investors about the Scottish referendum, many London banks and hedge funds have ordered their currency traders in tonight and early tomorrow, commandeering extra staff.
