GBP

It’s a busy week for the pound, with a Bank of England (BoE) policy meeting and the Scottish elections coming up. Both have the potential to set the tone for the month ahead.

The Scottish elections could be particularly volatile, with a Scottish National Party (SNP) victory sparking independence fears. First Minister of Scotland Nicola Sturgeon has previously stated an SNP majority gives them a mandate for a second referendum by the end of 2024. That’s regardless of the UK government’s wishes. Current polling shows them on track for said majority so there’s likely choppy waters ahead. 

This political uncertainty is a likely reason sterling has fallen from its previous 2021 highs. Investors price in potential political disruptions to the UK and how it could impact to the pound. The impact will likely be short-lived as any future referendum would be years away as Westminster would need to sign it off. In the case of Brexit, the risk premium only started to be priced into the pound six months prior to the event, so we’re a way off from significant weakness being built in here.

Key announcements

13:15 -USD- ADP Employment Change (Apr); expected to increase to 810k from previous 517k

15:00 -USD – ISM Services PMI (Apr); expected to increase to 64.3 from 63.7