British Pound Sterling, on Tuesday, February 28, traded close to a two-week low against the dollar as investors awaited a speech by U.S. President Donald Trump, with the pound kept under pressure by worries about the future of Britain as it leaves the European Union (EU).
The pound fell to as low as $1.2384 on Monday, its weakest in a fortnight, on reports that Scottish nationalists were preparing to demand a fresh independence referendum, possibly as early as March, to coincide with the government’s plan to formally trigger Britain’s exit from the EU.
It stayed close to that level on Tuesday, down 0.2 percent on the day at $1.2420.
Scottish First Minister Nicola Sturgeon said in a newspaper article on Tuesday that the “sheer intransigence” of the British government over Brexit could lead to a second referendum.
A British government spokesperson had said on Monday there should not be another vote, and that the mere threat of one was creating unnecessary uncertainty and division.
ING currency strategist Viraj Patel described a possible second independence referendum as one of a number of Brexit “tail risks”. But he said negotiations over Britain’s exit from the bloc – and not a possible Scottish exit – would be the key driver of the pound in the months to come.
BNY Mellon strategists, however, wrote in a research note to clients that it was surprising that sterling had not reacted more to news about Scotland, and that talk of a second referendum could start to become more important for markets.
“Sterling’s largely indifferent reaction so far to the flow of news on the possibility of a Scottish referendum follows the pattern seen in the run up to the 2014 referendum,” they wrote.
New Bank of England Deputy Governor Charlotte Hogg said on Tuesday that her tolerance for above-target inflation would depend on events, and that she would be willing to stand up to Governor Mark Carney if she did not agree with him.
Sterling showed little reaction to the comments, edging down 0.1 percent on the day against the euro to 85.25 pence.
