The British pound took a nosedive on Tuesday morning on news that Scottish Parliament voted 69 to 59 in favor of a second Scottish referendum, which is to be held within the next 18 months.
In an official statement following the vote, First Minister of Scotland, Nicola Sturgeon, said talks with UK authorities regarding the referendum will begin after the triggering of Article 50, adding that any opposition to the vote will go against the will of the Scottish people.
“Today’s vote must now be respected. The mandate for a referendum is beyond question, and it would be democratically indefensible - and utterly unsustainable - to attempt to stand in the way of it.”While the Scottish people voted against a split in the previous referendum, held in 2014, Sturgeon defended the need for a second referendum by claiming a “hugely damaging and uncertain future” for Scotland due to Brexit.
It remains unclear if Theresa May's Government would allow such a divisive vote amid the uncertainty surrounding Brexit, but financial markets were quick to respond.
Although the pound was on track to close off March with a gain of 2 percent, boosted by a weaker dollar and Bank of England’s decision on Mar. 16th to keep interest rates unchanged, today’s vote wiped out a sizable of the pound’s gains.
Following news of the vote, the GBP/USD rate dropped 0.90 percent against the U.S. dollar, erasing most of the gains from last Wednesday. And the FTSE 100 Index closed the day with a gain of 0.68 percent.
Pound banknotes photo by Petras Gagilas