The pound extended its losses for the second straight week after opinion polls showed that more Scots are in favor of a separation from the U.K., weighing on demand for the sterling.
The U.K. currency fell 0.5 percent last week to trade at $1.6244 at 5:04 p.m. in London on Friday. The pound also fell 0.5 percent to 79.74 pence per euro. The pound’s one-month implied volatility versus the U.S. dollar rose to 11.3 percent on Sept. 10, its strongest level since Nov. 2011.
“As the polls remain so close, and one suspects they will do between now and next Thursday, then it is difficult to suggest anything other than sterling remaining vulnerable to further bouts of uncertainty,” Jeremy Stretch, a London-based head of foreign-exchange strategy at Canadian Imperial Bank of Commerce, told Bloomberg News. “It’s all eyes on the polls, and rumor and innuendo until then.”
Scotland is scheduled to hold the vote for independence on Thursday, September 18th. Most analysts expect the pound to lose 5 percent to 10 percent of its value in the subsequent one month.
A poll conducted by YouGov on behalf of the Sunday Times indicated that “Yes” supporters outnumbered those opposed to it for the first time in 2014. Another survey by ICM that was published on Friday by Guardian newspaper showed 49 percent backed the split against 51 percent in the “No” camp, if undecided voters aren’t considered.
The 10-year gilts touched the highest level in five weeks after Bank of England Governor Mark Carney signaled on Sept.9 that interest rates may be hiked sooner. The 10-year gilt gained 0.07 percentage points, or seven basis points to 2.53 percent. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
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