Eyes on GBP and FTSE ahead of Referendum

Should Scotland be an independent country? That’s the single questions voters will be faced with come Thursday 18 September.

GBP notes
Source: Bloomberg

The run up to this historic vote has led to large increases in volatility on many markets including the FTSE and GBP/USD. 

While this volatility creates trading opportunities we would urge all clients to monitor their exposure carefully due to the increased likelihood of large, and very sudden, price movements.

Voting process
Polls will open from Thursday 18 September at 14:00 until Friday 19 September 05:00 (Singapore Time).

The result will only be officially declared when the vote tally from all Scotland's 32 local authorities have been provided and accepted as valid by the chief counting officer (CCO).

In the lead up, we are likely to see some market volatility. Regional centres can announce their own counts once they are checked and accepted by the CCO. In addition there may also be informal exit polls.

Unlike the various informal polls which have been making headlines, voters will only be able to vote ‘yes’ or ‘no’. This means the undecided voters could swing the results.

Recounts will only be undertaken at a local level. However, this will only be triggered if there are any concerns over the process,  not the closeness of the result.

YES campaign losing steam?

GBP/USD has lost over 3.4% since the beginning of August as the independence push gained traction. In the YouGov polls, the independence push had posted three successive four point increases, jumping from 39% in early August to 51%.

However, the latest survey last Thursday showed a reversal with ‘no’ back in the lead at 52%, slightly ahead of ‘Yes’ at 48%. This excludes undecided voters.

Where markets might head

Looking at cable, 1.6300 is a key resistance level to note. A bullish pin candle has formed after the price tested support around the 1.6050 area last week, which suggests a pause in bearish momentum.

Traders can use these support and resistance points as references to plan their trades, depending on news developments and expectations.

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The FTSE looks trapped in an ascending channel. The 6880 level is a strong resistance which remains unbroken since last May, despite positive risk appetite in the equities market. Traders can look out for a breakout between the 6,680 and 6,800 levels.

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