DailyFX European Market Wrap: Pound Falls on Prospect of Another Scottish Referendum
European markets are lower this Tuesday with the British currency falling on the prospect of another Scottish referendum as well as fears of a so called ‘hard Brexit’. Meanwhile in Germany, the ZEW investor confidence rose less than expected as political uncertainty weighed on the outlook of Europe’s so called powerhouse.
The Scottish National Party has warned the Theresa May not to slam the brakes on a second independence referendum, fearing that the British Prime Minister will try to delay it. After SNP leader Nicola Sturgeon’s announcement on Monday, Angus Robertson, the party deputy leader has weighed in, insisting the vote take place as early as autumn next year – rather than “see the prime minister drive us off a Brexit cliff."
Sterling is now at a two-month low against the US dollar as the reality of a Scottish referendum on independence is realized and Brexit nears. As we can see on Monday – cable actually rose slightly, but it appears a different view is taking hold this Tuesday. On a daily chart, cable has fallen from a recent February 24 high of 1.25702 to a current level of 1.21300 as sellers take control of the market, leaving the January 15 low of 1.19833 vulnerable. Below here, the October 7 2016 ‘spike low’ around 1.18000 comes into view. In addition to domestic problems, the US Federal Reserve is expected to raise interest rates, by 0.25%, on Wednesday, another negative for cable.
And we’re watching European politics closely this week on the eve of the Dutch elections. The current Prime Minister Mark Rutte wants the Netherlands to be the country that stops the rise of populism in Europe when the Dutch go to the polls on Wednesday. He said his country should be the “quarter finals to beat the wrong sort of populism,” in a year in which a number of EU countries go to the polls. The semi-final would be the French election in April/May and the final would be the German election in September, he said.
--- Written by Katie Pilbeam, DailyFX
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.