As we all know today is the day that Scotland votes whether to seek independence as the UK’s future hangs in the balance. Polling stations opened at 7am across Scotland and will close at 10pm tonight. The referendum is the culmination of almost two years of competing arguments over the viability of an independent Scotland, its economic well-being, currency and international standing.
If Scotland do decide to leave the UK then the UK economy is ready to battle. With the fastest growth among a group of Seven nations, Britain may have built up enough momentum to weather the possible loss of Scotland in today’s referendum, or to keep strengthening if the union survives. The economy has expanded for six straight quarters, payrolls are at a record high and authorities have forced the biggest banks to build capital reserves to steel themselves against shocks. Gross domestic product has returned to its pre-crisis levels, and the labor market is on the mend, giving a boost to consumer sentiment that’s helping entrench the revival from the deepest recession since World War II. Data yesterday showed unemployment dropped to a six-year low in the quarter to July.
So its not all doom and gloom here in sunny England.
This morning we have the UK retail sales figures for August and markets are expecting this to show a modest rise from July although the data may get less attention than usual.
In the US the dollar climbed to six year high versus the Japanese Yen and pushed up 80 points against sterling overnight after Federal Reserve officials raised their target-rate forecast. The US Dollar was set for the highest closing level in four years versus major peers after Fed policy makers increased their median estimate for the key rate to 1.375 percent at the end of 2015 versus June’s forecast for 1.125 percent. This hawkish twist to the Fed is pushing the greenback higher, and at the same time all its major peers are looking structurally weak at the moment.
In the euro area, the focus will be on the result of the first tranche of the ECB’s targeted LTRO programme, with the second following in December. Despite the additional measures announced at this months ECB meeting, the LTRO remains a key part of the ECB’s plan for stimulating the euro area economy.
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