Staying in touch with current affairs is often the best way to improve your financial returns in the Forex market and over the last few days one of the major stories affecting the strength of the GBP is Scotland’s impending referendum.
Whilst the national independence of Scotland might not usually be concern those looking to play the currency market using tradefair online, the FX market saw the GBP fall to a 10-month low against the dollar at the start of September because of the political unrest.
Market analysis shows that the GBP/USD was down by 1.33% to 1.6107 which is the lowest rate since November 21, 2013. The main cause for the drop in the strength of the British pound is that the latest opinion polls show that Scotland’s “Yes to independence” voters have a slight lead. Of course, no official figures will be available until the voting process takes places on September 18th. However, as investors begin to contemplate a British economy without Scotland, it’s caused a downswing in the financial performance of the GBP.
No Currency Union
The main sticking point from a currency point-of-view is that politicians in Westminster have stated that a formal currency union would be impossible. Although some are speculating that this is a tactical move by politicians in London in order to pressure Scotland into voting “no”, the prospect of a weakened GBP has caused a price drop.
Another reason the FX world has seen the GBP weaken over the last few months is because a slowdown in house prices. Back in July mortgage lender Halifax reported a 1.2% increase in the average house prices across the UK. However, in August the rate of growth had slowed to just 0.1%, prompting fears that market prices may have levelled out.
Both economic trends seem to be the main cause of concern for GBP investors and the reason why its market value has dropped considerably over the summer. In contrast, the Euro rose to a three-month high against the GBP last week. Up to 0.8034 against the GBP, a rise of 1.27%, the Euro is now enjoying a mini-resurgence in the FX market thanks, in part, to the new measures by the European Central Bank.
In an effort to stimulate more economic growth, the ECB has slashed interest rates and implement a range of measures to ease financial burdens and encourage growth. Although these measures are yet to inspire confidence among those still in the midst of economic turmoil, the FX market seems to have been buoyed by the news.
Of course, we all know the FX market is extremely temperamental and the latest fluctuations are nothing to get hung-up about, but if you’re planning on making an investment using tradefair online in the coming weeks, we’d recommend you keep an eye on the GBP. Although recent lows are bound to scare investors, the outcome of the Scottish referendum will no doubt stabilise the currency and restore it to its former levels.