Sterling fell against major currencies this morning, as the prospect of another Scottish independence vote and signs a major merger was unlikely to go through renewed fears about Britain’s future as it prepares to leave the European Union.
A report in the Times newspaper said British prime minister Theresa May is preparing for Scotland to call a fresh independence referendum in March. The Telegraph newspaper meanwhile reported that May is planning to curb freedom of movement for EU citizens as soon as she triggers Article 50.
The pound had its strongest week last week since January on Friday, as a lack of major domestic developments in Britain saw investors’ attention drawn to the U.S. economy and European politics, giving sterling some respite.
On top of soft data from the UK recently … these fresh signals of a ‘hard Brexit’ and the risk of another Scottish referendum, enhances our view that the broader outlook for sterling remains negative.