From Credit Agricole:
While likely to be highly volatile, GBP should hold above last week’s lows ahead of, and then rise following, the confirmation of a ‘no’ outcome from Thursday’s Scottish referendum.
Clearly however the result is tight, and a surprise ‘yes’ outcome could produce a significant (ie, >3%) decline in the GBP NEER. Beyond the dominance of this event, we remind readers to stay focused on underlying GBP-positive fundamentals.
Thus while secondary, labour and inflation data next week will also be important. Improving business activity bodes well for hiring intentions, labour market conditions and thus wage price developments.
Given the MPC’s focus on such wages developments, speculation surrounding future policy moves will remain a GBP driver.
This combined with further improving growth prospects should make the GBP subject to upside risk in the week ahead.
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