Forex snapshot

The tightness of the Scottish independence voting has seen GBP/USD come under pressure, while the Ukraine-Russia ceasefire has eased pressure on EUR/USD.

Source: Bloomberg

Today’s strong UK services PMI figures will have buoyed sentiment, however this has been outweighed by the hangover from yesterday’s YouGov poll for Scottish Independence. As the ‘No’ team’s lead has been whittled down from 22% to 6% in little over a month, currency traders have begun to more seriously consider the consequences. Arguably the most worrying thing has been the wholly unconvincing ‘We have a plan B’ statements coming out of Westminster, coupled with an unwillingness to elaborate.

The last 24 hours of trading have seen GBP/USD drop straight from $1.66 down through $1.65, as the last week’s rally has swiftly been wiped out. Further selling pressure could well be on the cards ahead of tomorrow’s Bank of England interest rate decision.

As much as Mario Draghi might be enjoying his birthday today, worries over how the markets will take the ECB’s rate decision and accompanying statement will no doubt be playing on his mind. As the markets have interpreted his comments made at Jackson Hole to mean the eurozone can expect stimulus, they will be all the more disappointed if none appears on Thursday. It is certainly far from a forgone conclusion – both Angel Merkel and German finance minister Wolfgang  Schaeuble were less than supportive when asked for their opinion on eurozone quantitative easing.

Today’s Russian-Ukraine ceasefire will go some way to bolstering optimism for the eurozone, but how long this lasts is open for debate.

The EUR/USD rate is now down below $1.3150 levels, last seen in September 2013. Even today’s news might not be enough to reverse the negative sentiment towards the euro.

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