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Scottish elections impacts markets: Pound advances

10 May 2021

The start of the week saw the British Pound Sterling advancing on the Euro and the Dollar, aided by the easing of UK political risks. The Scottish election took the headlines as the SNP won the vote but missed out on an outright majority. Following SNP leader Nicola Sturgeon’s comments on seeking an independence referendum, the markets shifted as it is clear that the focus will currently remain on the handling of the coronavirus pandemic. 

On Monday May 10, the Pound-to-Euro exchange rate was up half a percent at 1.155 whilst the Pound-to-Dollar exchange rate increased by 0.42% reaching 1.4050. Chief Analyst, Mikael Olai Milhøj noted the relation to the Scottish election: “For EUR/GBP, markets will digest the Scottish Parliament election results, where SNP fell short of winning the absolute majority, but where pro-independence parties did not.” 

Moreover, at the time of writing, the EUR/USD spot rate is 1.2157. Traders are eyeing the pair which came close to its late February highs with the global economy is showing signs of improvement. The Federal Reserve has repeatedly insisted that the U.S. economy is still far from the job and inflation targets that it wants to achieve before making changes to its globally supportive monetary policy. This was backed up by April’s non-farm payrolls data. 

ING’s global head of markets and regional head of research, Chris Turner said, “It likely relieved some pressure from the Fed to shift to a less dovish rhetoric. At the same time, the data-miss was not enough to severely dent the underlying recovery story, leaving the global risk sentiment broadly supported.”