By Julien Ponthus
LONDON (Reuters) – Sterling was unchanged against the dollar on Wednesday morning as a poll showed Scotland’s main pro-independence party was unlikely to win an outright majority in Thursday’s election, a blow to its hopes for a referendum on separating from Britain.
The Scottish National Party (SNP) wants a majority in the devolved parliament to demand another referendum, although British Prime Minister Boris Johnson has repeatedly said he will not grant one.
For this reason, the impact of the election’s results on the British currency are expected to be fairly limited.
“It is far from clear how we get to a second referendum, even under a landslide SNP victory and in the event of a referendum, the majority in favour of independence has largely disappeared with opinion now split 50/50”, wrote Adam Cole, chief currency strategist at RBC Capital Markets, in a morning note.
Analysts at ING shared the same view.
“We expect the impact of the Scottish elections on GBP to be very limited”, they argued adding that “regardless of the result, most don’t expect an imminent vote on independence”.
While an independent Scotland appears to be a risk fairly far away on the horizon for investors, Britain’s monetary policy and its exit strategy from the massive stimulus launched to weather the impact of the coronavirus pandemic represents a more immediate concern.
Policymakers of the Bank of England meet on Thursday when the central bank will publish its May Monetary Policy Report.
“Traders are focusing more on the near-term risk of a more hawkish Bank of England than on the long-term risk of Scottish independence”, Marshall Gittler, head of investment research at BDSwiss, told his clients.
“I expect the Committee to vote unanimously to keep Bank Rate and the total amount of bond purchase unchanged at GBP 895bn but to slow the weekly pace of bond-buying from its current GBP 4.4bn a week to around GBP 3.5bn or GBP 3.0bn”, Gittler said.
At 0819 GMT, sterling was up just 0.01% at $1.3888 and rose 0.21% against the euro at 0.8632 pence.
(Reporting by Julien Ponthus; Editing by Kim Coghill)