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GBP/USD is shaking, rattling and rolling on any news related to Scotland. BOE Governor Mark Carney, who was previously the king of pound volatility, only has a temporary  impact, despite some interesting statements. Pound trading is dominated by headlines regarding the referendum on Scottish independence, due on September 18th.

As Brits are certainly fond of betting, the collective wisdom of the betting companies has a critical mass that can help understand the mood (but certainly not the outcome). This information  can also be useful in understanding what impact we will see on the British pound, in any of the two outcomes.

So, looking at this page on Oddschecker, the following conclusions can be taken, at least at the time of writing, when the odds look like this:

Click image to enlarge
Click image to enlarge – ht  James from Forex Articles
  1. The odds are shortening on a Yes vote for Scottish independence and drifting on a No vote. Note that the Yes odds are in blue while the No are in red. This means  that more money is  going into the bet that Scotland will say Yes to independence.  This just follows up on the general picture from the opinion polls, that show a tighter race.
  2. The odds are clearly in favor of a No vote: 1.45 is a lower return than 2.88 for Yes. (The site supports other ways of seeing the bets). Despite the  recent changes in  opinion polls and in betting, there is a clear tendency to see a No vote according to a wide array of bookies.

GBP reaction to the vote

As uncertainty  rules now, any result will move markets. No result is fully priced in, and we cannot expect a “buy the rumor, sell the fact” trade on any outcome. Simply put: a Yes vote will hurt the pound and a No vote will boost it. This view is reinforced by the first observation that the race is closer, in polls and in the bets.

But what can we learn from the second conclusion regarding  the impact on the pound.

The answer is that in case of a Yes vote, the impact is set to be much stronger than a reaction in case of a No vote.

If GBP/USD  continues trading around 1.61 on September 18th (and it can certainly move away from these levels, given recent volatility), a Yes vote could send it all the way down to 1.50 or even lower, to 2010 levels.

On the other hand, a No vote is unlikely to be enough for the pair to tackle the 2014 highs just under 1.72.

What will happen on September 18th?

I tend to agree with  the betting odds and assume that a small majority will favor a No vote. Adam Button at Forex Live has a great analysis about this, and a key point is that the undecided voters are probably cautious, if not scared, and they are more likely to vote for a continuation of the current situation rather than a change into the unknown.

Personally, living here in Barcelona, the capital of the Spanish region of  Catalonia, the Scottish vote will be closely watched and  will certainly have an impact on the non-binding vote here on November 9th.

In any case, it will be  interesting to feel the pulse by following the betting odds in the next tense week leading to the September 18th vote.

What do you think?

Further reading:  GBP/USD technical analysis – next levels on the downside