The pound rallied earlier in the week, hitting its highest level in more than two months.
The British pound jumped nearly a cent against the US dollar, hitting $ 1.406 for the first time since late February, as traders digest last week’s election results.
Over the weekend, the Scottish Nationalist Party fell fair short of an outright majority in the Scottish Parliament, winning 64 of 129 seats. This appears to allay some of the city’s concerns about the breakup of the UK.
However, the SNP still won a historic fourth consecutive victory … and there will be a majority of pro-independence MPs in the new parliament, with the Scottish Greens winning eight seats.
The problem has therefore not gone away, with SNP leader Nicola Sturgeon pledging to advance plans for a second independence referendum.
As my colleague Libby Brooks writes:
Nicola Sturgeon told Boris Johnson a second independence referendum is “a matter of when, not if” after the Scottish National Party won a historic fourth term in Holyrood on Saturday with a pro-independence MSP majority of return despite the tactical vote by union supporters.
The Scottish Prime Minister made the claim during a phone call with the Prime Minister on Sunday evening, although senior Tory officials are questioning his tenure.
Sturgeon has previously indicated she is ready for a constitutional battle, saying her government will legislate for the vote “and if Boris Johnson wanted to stop he would have to go to court.”
Jim Reid from German Bank tells customers:
In the UK, the Scottish question will remain at the center of attention, with the SNP simply failing to win a majority but still showing strong results. With the Scottish Green Party, they have a pro-independence majority.
Optimism about unlocking the UK economy could also lift some support for the pound.
From May 17, pubs, cafes and restaurants will be able to welcome patrons indoors for the first time in months – for groups of up to six or two households.
Cinemas, galleries and the rest of the accommodation industry will also reopen, with hospitality restrictions lifted due to the drop in Covid-19 infections. This should underpin hopes for an economic recovery this year.
The pound is also benefiting from the weak dollar, which slipped on Friday after a surprisingly weak US employment report. News that only 266,000 new jobs were created last month dampened optimism about the pace of the recovery.
European stock markets are expected to pick up this morning, with investors believing that weaker job growth means central bankers will not rush to end their stimulus measures.
- 8:30 a.m. BST: Halifax UK House Price Survey for April
- 10am BST: NIESR Research Institute latest economic forecast in UK and globally
- 2:45 p.m. BST: ISM New York index of economic activity in April