Forex snapshot

Sterling is back above the $1.62 mark after the latest Scottish referendum poll put the ‘No’ camp back in the lead, while the euro continues to meander around the $1.29 mark.

Euro and US dollar notes
Source: Bloomberg

Sterling back above $1.62

The pound is trading at $1.6223, slightly higher on the day, and is showing no signs of crawling back the ground it lost to the US dollar in the past week. Even though we could see a big pull back in the pound if Scots vote ‘No’ traders will be reluctant to take a firm long position on the pound.

The bias remains to the downside, and we are now one week away from the referendum. I suspect the pound will be back below $1.61 as the referendum draws nearer. Only a massive surge in the ‘No’ campaign would drive the pound towards $1.6336.

Euro hovers above $1.29

The euro is trading at $1.2920 as trading volumes and market volatility have been low. The Scottish referendum has stolen the spotlight, and the situation in Ukraine appears to be politically stable even though there are still some small skirmishes.

Mario Draghi is due to speak at the European financial forum in Milan at 8pm (London time). As always the language is key, and I suspect Mr Draghi will resort to his old tactic of discussing the ‘tools’ that are available if required.

Any suggestion that he is open to more easing down the line could push the euro to $1.2859, but it is likely to encounter resistance at $1.3015.

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