Scotland Vote is All That Matters for GBP

Forecasts suggest impact of a Yes result could further downgrade the Euro as it watches the Scotland outcome. Results are due overnight from 2am onwards.  Meanwhile the Fed avoided firm timing for the US rate rise, having little effect on the US Dollar. 

GBP Pound: Nerves On End As Scotland Votes

Pound Sterling gained slightly this morning showing confidence for a No vote. But a Yes vote could trigger a sharp drop in the pound, even worse than any drop in the Euro, which could boost EUR-GBP conversion rates.

The vote will dictate price action for the GBP-USD with retail sales and CBI data expected to be secondary.

Outside of the Scotland vote, the Bank of England minutes did not have much effect on the Pound today, as interest rate voting results replicated August. Fears continue over lack of price pressures, increased downside risks and how deep a new slowdown in Europe could be.

Euro: TLTRO Fails To Boost Euro

Slightly out of the limelight this week, but the ECB had big hopes for its TLTROs, with nearly EUR 1 trillion on offer; however Europe’s banks only bid for EUR 82.6bn, well below the market’s expectations of EUR 174bn.

Banks took relatively modest sums: Italy’s Monte Paschi - EUR 3bn and Unicredit -  EUR 12 bn; Spain’s Banco Poular - EUR 2.85bn; France’s Societe Generale bid but did not disclose the amount. These small amounts are unlikely to help the ECB to boost the Eurozone’s economy or get out of deflation.

The next 24 hours could also be crucial for the Euro as Scotland decides on its independence. A yes vote could at its most extreme, trigger the eventual break-up of the EU.

Descending trend channel on daily chart depicts the weakness of EURGBP which currently trades near 0.7950 level, near to its yearly low of 0.7874 level. 

US Dollar: No New News From Fed 

The Federal Reserve meeting’s ‘considerable time’ wording remained. The US dollar initially rallied on the news: but pulled back as more clarity on the Fed’s anticipated timeline was anticipated.

Overall, Fed officials were marginally more pessimistic about growth over the next few years, though they were more optimistic about the unemployment rate continuing to fall.

The Fed’s statement also outlined new instruments to be used as part of the central bank’s 'exit strategy', suggesting that the members are looking at how to normalise policy after all the easing measures of the past few years.

A gradual interest rate increase is expected through 2015 and 2016. Indications suggest a 25bps US interest rate rise in spring 2015.

The pound to US dollar exchange rate: 1 GBP converts into 1.6285 USD. 
The euro to US dollar exchange rate: 1 EUR converts into 1.2827 USD. 
The euro to pound exchange rate: 1 EUR converts into 0.7873 GBP.