The British pound came under pressure today before paring its losses over the possibility of another referendum by Scotland for independence to break away from the UK.
At 5.00pm (GMT) the British currency was trading at $1.2473 against its US counterpart, after reaching a low of $1.2383 earlier in the trading session, and up from $1.2460 in yesterday’s trading.
A potential second referendum for Scotland to leave the UK is seen as negative for the pound, as many predict that this time around the move will be successful, as many Scots do not want to break away from the European Union.
The results of the Brexit vote showed a whopping 62% of the Scottish population voted to remain in the EU
“The reason this morning’s price action was interesting is that it suggests there’s potential for political risk to affect sterling if it’s centered around the Scottish referendum and become a major downside driver for the currency”, said Ranko Berich, head of market analysis at Monex Europe.
The pound was able to recover some of its losses later in the day as traders positioned themselves for a speech by US president Donald trump to the American congress where he is expected to lay out some of his proposed tax policies, amongst other things.
The Market is skeptical of Trump at the moment,, and many predict that it will be difficult for the US president to push through his plans, especially when the majority of them need congressional approval,
“It is Trump that poses the immediate risk to the GBP/USD rather than Brexit and although the cable is weak at the time of this writing, it could very easily bounce back as speculators reduce their long exposures to the dollar ahead of Trump’s speech.” said Fawad Razaqzada, market analyst at Forex.com
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