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Friday, 19 September 2014

Pound Sterling rallies a little after Scottish poll

The Pound Sterling has rallied against the US Dollar (GBP/USD) following the "No" vote in the Scottish referendum. It should not, however, be expected to carry the price back to the level it held before the debate on Scottish independence started.

Click on the image to enlarge.

The graph shows the progress of the Great Britain Pound (Sterling) against the US Dollar over the past 5 years. It has been trending up and down within bands marked by Trend Lines A and B. The Horizontal red line shows the position it held before the Scottish referendum on independence drove the price down. This slump, however, was just the continuation of an existing downtrend. The rejection of Independence has brought an upswing in the price. The strength of the American economy, and the political confusion over devolution of powers within the United Kingdom, however, will tend to continue the sentiment that supports the downtrend. Conclusion: it is unlikely that the present upswing will bring the price back to $1.66, held before the debate on Scottish independence started. The upswing will quickly run out of steam and allow the downtrend to continue.

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