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Sterling holds near three-month high despite Scottish referendum talk

27 Nov 2020 / 17:09 H.

    * Graphic: World FX rates in 2020 http://tmsnrt.rs/2egbfVh

    * Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv

    By Lawrence White

    LONDON, Nov 27 (Reuters) - Sterling hovered near its three month high on Friday, brushing off fresh talk of a Scottish independence referendum that could wrench apart the United Kingdom after Brexit.

    Scottish leader Nicola Sturgeon said the vote should take place in the earlier part of the devolved parliament's next term, which begins next year.

    Scots voted 55-45 percent against independence in a 2014 referendum but both Brexit and the British government's handling of the COVID-19 crisis have bolstered support for independence among Scots.

    Weakness in the U.S. dollar amid thin trading due to the Thanksgiving holiday further bolstered sterling, which has crept to a three-month high in recent days on optimism over Brexit talks between Britain and the European Union.

    With five weeks left of a transition period before Britain leaves the bloc, markets anticipate a deal can be struck even though stumbling blocks remain.

    Analysts cautioned that the pound could be in for a bumpy ride in the months ahead despite its current strength, as the twin threats of Brexit and the Scottish vote crystallise.

    "Deal or no deal, there's sure to be chaos early next year. If that encourages people to vote to leave the UK it would be a double blow to the currency," said Marshall Gittler, Head of Investment Research at BDSwiss Group in a research note.

    The pound was flat against the dollar at $1.3369 in early trade on Friday morning, and unchanged against the euro at 89.205 pence.

    (Reporting By Lawrence White; editing by Philippa Fletcher)

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