EUR/GBP: Possible Scottish referendum to prevent a return to pre-Brexit levels – SocGen

Local and regional elections in the UK on Thursday, May 6 have rekindled interest in the thorny question of Scottish independence. The uncertainty surrounding a vote would be bad for the pound, as Kit Juckes, Chief Global FX Strategist at Société Générale, notes.

See: Scottish elections to have a marginal impact on GBP as referendum is still years away – ING

EUR/GBP can only make temporary forays below 0.87

“If pro-independence parties gain a strong majority in the new Scottish Parliament, First Minister and SNP leader Nicola Sturgeon will likely demand a second independence referendum, once the Covid-19 pandemic is behind us.”

“The possibility of a second Scottish referendum in Scotland reinforces our belief that EUR/GBP won’t go back to its pre-Brexit-referendum levels for many years.”

“Our end-year forecast for EUR/GBP remains at 0.87, which is where it is trading today. A big victory for the SNP certainly wouldn’t be a reason to move that forecast down, even if Thursday sees the UK MPC signal a slowing in the pace of asset purchases.”