Pound drops on reports of a new Scottish independence referendum

Pound drops

The pound fell against its major peers after reports say that U.K. Prime Minister Theresa May’s team is preparing for Scotland to potentially call for an independence referendum.

Another bid for independence has been seen likely by some ever since the Brexit referendum, when a strong majority of Scots voted to stay as a part of the European Union.

The Sterling slid 0.7 percent against the dollar early in the session and was also 0.5 percent lower against the euro.

The currency dropped after Times of London newspaper reported that, “Theresa May reportedly fears the Scottish government will call another independence referendum around the same time she triggers the formal Brexit process under Article 50 next month.” It stayed lower even after May’s spokesman Greg Swift said on Monday that there should be no second Scottish vote.

The paper offered that Prime Minister May could "reject the request and trigger a constitutional crisis or accept it and potentially imperil the future of the United Kingdom".

Talk of Scotland leaving the U.K. after the Brexit vote isn’t new. Scotland voted 55 percent to 45 percent in the last referendum to stay inside the U.K.

“The eventuality hasn’t been largely factored in the pound’s value so far,” wrote Ipek Ozkardeskaya, a senior market analyst at London Capital Group Limited. “If Scotland decides to proceed with the second referendum to quit the U.K., there would certainly be another fundamental downshift in the pound’s value, both against the U.S. dollar and the euro.”

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