Home Forex Market News European Session – Pound drops on Scottish Independence poll; ISM helps dollar

European Session – Pound drops on Scottish Independence poll; ISM helps dollar

News that a new poll showing the Scottish pro-independence camp closing the gap with the “no” camp came as a small shock to financial markets.  The pound dropped to as low as 1.6513 against the US dollar from above 1.66 the previous day, while euro / pound climbed to 0.7939.

On a more positive note for sterling, the Markit / CIPS UK construction sector PMI beat expectations by rising to 64 against expectations of a drop to 61.4 from the previous month’s 62.4 reading.

The “No” camp is still expected to win the September 17 Scottish independence referendum, but that the latest poll showed only a 6 percentage point gap between the two groups showed this is no longer a comfortable call.  A win by the “Yes” vote could have wide-ranging repercussions for the UK economy and could usher in a period of political and economic uncertainty until the details of the split would be decided.

In other statistics, Eurozone producer prices fell by 1.1% year-on-year – in line with expectations – mainly as a result of falling energy prices.  The euro held near its recent lows throughout the day, as traders were reluctant to push it lower in case the ECB underdelivers on QE when it meets on Thursday.

The dollar managed to climb above 105 yen following a strong August ISM manufacturing number that came in at 59 against expectations of a 56.8 print.  It was the highest reading for the index since March of 2011 and it reinforces the view that the US economy is on a solid growth path.

Looking ahead to tomorrow’s Asian and European sessions, Australian GDP will be closely watched followed by Euzone Services final PMI for August and July retail sales.

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