On a day with quite a few announcements, there is only one that everyone is talking about, the Scottish Independence Referendum. The Scots are trying to decide if they want to still be in the United Kingdom, and with that, the value of the British Pound and FTSE will be in focus. The markets look ripe for a nice move higher, and as a result, we feel that the call side will be the right one. The GBP/USD market will more than likely be the one that performs better of the two, as the FTSE will be closed by the time the vote results come in.
With that being said, we believe that the so-called smart money is front running the vote. The British pound has seen a bit of strength over the last 24 hours, and as a result we are interested in going long. If we can break the top of the range for the day, we see no reason whatsoever as to why the British pound will go as high as 1.66 against the US dollar. In fact, this could be a move that is very sudden, and extraordinarily violent.
It should be said though that if the Scottish decide to leave the United Kingdom that is a move that will probably be even quite a bit rougher. Nonetheless, we think that the Scots are going to stay, as we have seen in recent referendums in other places around the world. The first one that comes to mind is Québec, as there was a large amount of undecided votes there as well. At the end of the day, is quite common for undecided voters to either not vote, or stick with the status quo. Because of this, we believe that the British pound will have an extraordinarily strong showing, as soon as everybody is comfortable enough to start going long.
