Pound Gets Pounded as Rumors Abound

Since today morning, the pound seems to be under a lot of stress as it gets hit from all sides and in fact, looks very weak and vulnerable to get hit even more as the hours and days tick by. The reason for the woes of the pound are the rumors surrounding the referendum in Scotland. This is likely to be the second referendum in Scotland asking for independence and of course, the UK government isn’t going to be too happy to know about it.

The exit by Scotland would not only affect the UK economy in an adverse manner, it is also likely to encourage other parts of the UK, including Wales and Ireland, to seek independence as well and these arent good signs for the UK. This fear and uncertainty is reflected in the pound since morning and as a result of that, we have seen the GBPUSD drop below 1.24 for a brief while and though it trades just above that as of this writing, it continues to look very weak and as though it might fall at any point of time if more such news events come in or if the dollar gains some traction across the board.

In other news so far, the dollar has been slightly weakening since this morning and this has been used well by the bulls in EURUSD and gold as well as the gold prices continue to move steadily higher since this morning. This weakening of the dollar against the other currencies is set to continue for the rest of the day as the market starts to realize, a bit slowly, that there might not be any rate hike for March and the rate hikes from the Fed are likely to get delayed to April or May. It may also lead to a disruption in the plans of the Fed to hike thrice this year and so the market needs to adjust and price itself accordingly. With not much news around and with the month end approaching, we may see some month end currency flows dominating the moves today and tomorrow.