How has it come to this? Arguably the most successful political union the world has ever seen could come to an end on Thursday as Scotland votes for independence. Largely ignored in the press until very recently, more worryingly ignored by most major politicians in Westminster until the ‘Yes’ for independence vote gained traction: which certainly gave the independence vote credibility- with what had been expected to be a runaway victory for the ‘no’ for party.
Since then, business leaders from both internal Scottish based companies and international conglomerates that are currently based in Scotland have all voiced concerns over a note for independence. The market most affect by this is GBPUSD- most recently moved lower from 1.67 to 1.61 on the back of traction in the ‘Yes’ party – a move of 600 pips certainly caught the long camp offside.
But is this a fantastic opportunity to enter here, for an expected move higher? Without doubt a No vote could see GBPUSD revert back to its previous level of 1.67 and then on to the 1.70 mark, should the upward momentum continue as short positioning is exited.
But are we missing something? For me, I think investors should tread with trepidation: the statistics are all centred around logic that demands that a ‘Yes’ vote would isolate Scotland, make it potentially financially worse off and ultimately dissuade foreign investment and capital.
But this is a vote that is more emotive than anything else and financial modelling won’t be able predict this. That is why businesses with exposure to an independent Scotland are currently massively concerned with not a lot of options to mitigate risk.
Should Scotland gain independence, the initial move lower in GBPUSD could be as far as 1.52, the unexpected nature and the crescendo type event will culminate in aggressive one way price action – there will be opportunities after the vote, the price action and market noise will dictate this: the possible reward to go into this vote with a position does not out way the risk.