British Pound Collapses To 10-Month Lows

Jon Alternative Media, Blogosphere, Economy, Politics

We warned here that the “Yes” vote for Scottish Independence was a “high risk” event, and as we noted earlier, with polls indicating its a high probability and ‘English’ leadership in full panic mode, it is perhaps not surprising that the British Pound opened down 160pips at 10-month lows… (a 500 pip drop in 3 days)… But, didn’t the clever people on TV tell us ‘it was priced in’?

Chart: Bloomberg
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As we concluded previously,
Some Possible Implications Of a ‘Yes’ Vote
In our view, a ‘yes’ vote would have several key implications:
Bad for UK growth. Uncertainties over the economic prospects, policies and currency arrangements of an independent Scotland probably would hit growth in both Scotland and the rest of the UK (rUK), raising the incentive for firms to ‘wait and see’ or to expand elsewhere. Exports to Scotland account for roughly 4% of GDP for the rUK and Scotland would immediately be the rUK’s second biggest trading partner, slightly behind the US and slightly above Germany. Moreover, many banks and businesses have sizeable cross-border exposures between Scotland and rUK, and some firms may seek to limit such exposure as a hedge against the possible breakup of sterlingisation (if that is the policy adopted).

This post was published at Zero Hedge on 09/07/2014.