Pound sterling soars as Sturgeon's failure to secure independence boosts UK markets

Pound sterling soars as Sturgeon's failure to secure independence boosts UK markets

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steadied above $1.41 on Tuesday after posting its best day against a weakening at the beginning of the of the week as markets reacted to the results, along with improved economic forecasts, and lockdown easing measures. By 0747 GMT, sterling was 0.1 percent higher against the at $1.4135, shy of the 2-1/2-month peak of $1.4158 hit on Monday.

Against the euro, the pound traded flat at its one-month high of 85.88 pence per euro.

Jeremy Thomson-Cook, Chief Economist at EqualsMoney, said: “Sterling rallied throughout the course of yesterday with political certainty being the key driver for once.”

With political uncertainty having proved to be a drag on sterling’s performance over the last few years, the currency had taken some respite following last week’s elections both north and south of the border, said Mr Thomson-Cook.

Boris Johnson Sir Keir Starmer

Boris Johnson – and Sir Keir Starmer – at today’s State opening of Parliament (Image: GETTY)

Nicola Sturgeon

Nicola Sturgeon is unlikely to accept Mr Johnson’s refusal (Image: GETTY)

He added: “The Conservative party drew success from local elections, securing Boris Johnson’s position at the helm with Labour in disarray.

“Whilst the SNP won in Scottish elections, they failed to win a full majority in the Scottish Parliament thus reducing any near term chances of an independence vote.”

In all probability the SNP would form a government with the Greens, who are also pro-independence, Mr Thomson-Cook acknowledged.

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Boris Johnson

Boris Johnson, on the left, has ruled out an independence referendum (Image: GETTY)

However, he suggested concerns about a possible second independence vote seemed to be a longer-term worry than anything to be concerned about in the near future.

He said: “So with the major stumbling block for the pound now in the past, it looks like further moves for the pound will be dictated by economic performance and if the economy performs as well as the Bank of England alluded to last week.”

Despite falling agonisingly short of the 65 seats required for a majority in the Scottish Parliament, First Minister Nicola Sturgeon is nevertheless claiming she has a mandate to pursue plans for a second independence referendum.

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Pound dollar

The pound is up against the dollar (Image: Google)

Pound euro

The pound is also rising vs the euro (Image: Google)

However, any second referendum on Scottish independence requires the approval of the British Government.

UK Prime Minister Boris Johnson has already ruled the idea out – although Mrs Sturgeon has already raised the possibility of future court action to challenge his stance.

Speaking today, Petr Krpata, chief EMEA FX and IR strategist at ING, said: “As we have argued previously, the Scottish elections were not supposed to have a long lasting negative impact on the pound and the pound rally yesterday provided a case in point.

Scottish elections

The SNP’s 64 seats left the party one short of an overall majority (Image: Express)

“With the UK government confirming the next step of the reopening of the economy, the solid UK data points this quarter should benefit sterling.”

Mikael Olai Milhoj, chief analyst at Danske Bank, added: “Euro-sterling moved a full figure lower yesterday to below 86 pence, as investors moved beyond the Scottish Parliament election.

“Another Scottish independence referendum is far away and hence not something markets will trade on near-term.”

Pound sterling

Markets had been jittery prior to the elections (Image: GETTY)

Sterling is the third-best performing G10 currency against the US dollar year-to-date, trailing the commodity-linked Norwegian crown and the Canadian dollar.

The pound has also benefited from the Bank of England beginning to taper its bond purchasing programme last week, on the back of an improving economic outlook.

Mr Johnson yesterday confirmed England could continue to the next stage of his four-step plan to bring the country out of lockdown by the summer, as the COVID-19 situation improved thanks to the rollout of vaccines and social restriction measures.

Scotland voted on whether or not to leave the UK in 2014, voting by 55 percent to 45 percent to stay in the Union.

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