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The latest polls show a stronger convergence towards a No vote in the Scotland referendum vote, and one betting firm is already paying out on some of the No bets.  There is a growing notion that a No vote is 90% priced in.

This makes a Yes vote an even wilder outcome for the markets. But how real is the  chance that Scotland will vote for independence?    Here are 5 reasons why polls could be totally wrong, Scotland will vote Yes  and this will result in extreme volatility.

  1. No  absolute majority in polls: the headlines regarding  opinion polls strip out the people who are undecided. So when the polls show 52% against and 48% for independence,  this doesn’t mean a majority of Scots polled have supported a No vote.  When counting  the undecideds, there are around 45% No and 41% Yes. All the rest, 14% in this case, are undecided. And it’s true that those who do not decide, usually decide No, but this is very uncertain.
  2. Only residents vote:  Those eligible for voting are residents of Scotland who are either UK, EU or Commonwealth nationals. Scots who are living in other parts of the UK or outside the country are not eligible to vote.  So while  non-Scot residents probably lean towards a No vote, also non-resident Scots would probably favor a No vote. Both groups enjoy the benefits of moving around and would probably fear a change in the status quo. However, there is a better chance that a  non-Scot resident would not bother to vote while a more passionate non-resident Scot would have preferred to vote No but doesn’t possess the right to vote. Polling companies are used a model where only  Scottish nationals vote, and not only residents. While they have made huge efforts to adapt their models to the new rules, this is the first case of its kind and they might have gotten it wrong.
  3. Young voters eligible to vote: All Scottish residents aged 16 and up can vote. This is also different from the normal models that  allow voting from 18 years and up.  Young voters are more open to change and  usually more enthusiastic about nationalistic values. Older people tend to lean towards the status quo. Also here, polling companies have probably adapted their models towards this change, but have they got it right? This remains an open question.
  4. Historic vote: It is hard to exaggerate the importance of this vote: a union of 307 years is at stake and the uncertainties are high. This is not a normal vote between  Labour and Tories, nor is it a vote on the euro (which never happened in the UK) is very important but not as emotional as the fate of the United Kingdom, the Union Jack, etc. There are lots of logical arguments for and against  independence,  but it certainly isn’t guaranteed that cold calculations will apply at the crucial moment in the ballot box.
  5. High turnout expected: We already know as a fact that no less than 97% of eligible voters have registered to vote. Estimations are for a turnout of between 80% to 90%, much higher than average in UK elections at all levels.  Have  opinion polls factored this in?

If Scotland votes No, as more and more people expect, there  is room for a nice upwards move in GBP/USD, but it probably will not go too far. 1.70 seems out of question. However, if we have a surprising Yes vote, estimates range  between 1.46 and 1.52.

More on the big event: