Pound drops as May said to prepare for new Scottish referendum

[SINGAPORE] The pound fell against all its major peers after a report said UK Prime Minister Theresa May's team was preparing for Scotland to potentially call for an independence referendum in March.

Sterling fell as much as 0.6 per cent after the Times cited unidentified government sources as saying Mrs May could agree to a new Scottish vote, but on condition it is held after the UK leaves the European Union.

Leveraged and macro funds hit bids in response to the report, an Asia-based foreign-exchange trader said. Scotland voted 55 per cent to 45 per cent in Sept 2014 to stay inside the UK. The House of Lords also begins Monday a detailed examination of the bill authorising Mrs May to trigger the nation's withdrawal from the bloc.

"If the market does seriously think there can be another independence referendum much sooner than that, then remembering how hard the pound fell in early September 2014 just in front of the prior referendum, the memory of that makes sterling a fairly easy sell here," said Ray Attrill, global co-head of foreign exchange at National Australia Bank Ltd in Sydney.

"I suspect there's been a bit of an overreaction here."

GBP/USD drops 0.3 per cent to 1.2424 after sliding to 1.2392, the lowest level since Feb 17.

"It seems unlikely that Westminster would agree to another referendum any time soon," says Sean Callow, senior strategist at Westpac in Sydney.

"I wouldn't be surprised to see GBP/USD back above 1.2450 in London trade unless there has been a genuine change in the timetable for another Scottish vote."


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