What will happen to the value of the pound sterling should the Scottish nationalist's succeed in their bid for seperation from the UK? Bank of America Merrill Lynch have told us that sterling risks losing value in the event of a Yes vote. 

The current base-case scenario at Bank of America Merrill Lynch show a stronger pound against the euro, but a  somewhat weaker British Pound (GBP) versus the USD in 2014 and 2015.

However, with the Scottish referendum on independence looming analyst Athanasios Vamvakidis says he sees downside risks for the pound sterling:

"The Scotland referendum is a downside short-term risk to our GBP projections in 2014, particularly if long GBP positions increase further in the meantime and the referendum polls become more inconclusive, triggering market concerns."

The analyst argues that if this risk materialises, the specifics of the scenario that will unfold will determine whether it will lead to a persistent GBP weakening, "or an opportunity to buy the dip once the dust settles down."

Indeed, as is so often the case with financial markets, it may turn out to be a case of "buy the rumour and sell the fact".

That said, exchange rate markets have not bought the rumour yet.

Of course if Scotland votes No then pound sterling valuations will remain unchanged.

In the event of a Yes vote we have a number of currency-specific scenarios to work through.

Bank of America's key arguments relating currency are as follows:

• Depending on the final currency arrangement and the institutions to support it, an independent Scotland could result in contingent liabilities for the  continuing UK. Even if the final arrangements address such contingent liabilities, BofA have argued above that it will take time to nail down all the details, with uncertainty in the meantime.
• The continuing UK's debt ratio is likely to increase, at least in the short term, under certain scenarios. Such an increase could lead to higher fiscal risks, given the already high debt-to-GDP ratio, and to a tighter fiscal policy. Both could lead to a looser monetary policy than otherwise. A slightly smaller fiscal deficit than otherwise would only offset part of this impact.
• The UK current account balance would deteriorate because of the loss of oil exports, which would be only partly offset by a current account surplus with Scotland.
• BofA don't expect the slightly faster UK GDP growth because of the absence of the long-term drag from declining North Sea oil production to offset the potential deterioration of the debt ratio and the balance of payments. Its impact would only be in the long term and will therefore not be very relevant for market concerns in the short-term.
• Somewhat lower CPI inflation could allow looser monetary policy, everything else being the same.
• Uncertainty related with the 2015 elections would likely increase. None of the above by themselves may be enough to have a notable GBP impact. However, taken together, Bank of America believe these factors are likely to weaken the GBP.
• Determining the timing of the GBP impact is not straightforward. At this point, GBP is driven primarily by the strong UK data and expectations that the BoE will be the first major central bank to hike rates early next year.
• We would expect the market to start focusing on the referendum in Scotland closer to September and only if the polls become more inconclusive. At that point, uncertainty may only slow the GBP strengthening if UK data continue improving, or could weaken it if UK data have peaked and investors take profits from positions that are already long today.

Moreover, it may end up being a case of "buy the rumour and sell the fact", with concerns weakening the GBP just before the referendum, but GBP continuing strengthening after the result, although at a slower pace, even if Scotland votes for independence.

However, Vamvakidis believes the market has not bought the "rumour" yet and we would therefore flag the referendum in Scotland as a key negative risk for GBP in 2014.