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The pound is rallying at the start of the week, hitting its highest level in over two months.
Sterling has jumped nearly a cent against the US dollar, hitting $1.406 for the first time since late February, as traders digest the results of last week’s elections.
The pound vs the US dollar in 2021 Photograph: Refinitiv
Over the weekend, Scottish Nationalist Party fell just short of an outright majority in the Scottish Parliament, winning 64 of the 129 seats. This appears to be easing some City concerns about a breakup of the UK.
However, the SNP have still won a historic fourth consecutive victory…and there will be a majority of pro-independence MSPs in the new parliament, with the Scottish Greens winning eight seats.
BBC Scotland News
So the issue has not vanished, with SNP leader Nicola Sturgeon pledging to press ahead with plans for a second independence referendum.
As my colleague Libby Brooks writes:
Nicola Sturgeon has told Boris Johnson that a second independence referendum is “a matter of when, not if” after the Scottish National party secured a historic fourth term at Holyrood on Saturday with a pro-independence majority of MSPs returned despite tactical voting by pro-union supporters.
Scotland’s first minister made the assertion in a telephone call with the prime minister on Sunday evening, despite senior Conservative figures questioning her mandate.
Sturgeon has already signalled her readiness for a constitutional battle
, saying her government would legislate for the vote “and if Boris Johnson wants to stop that he would have to go to court”.
Jim Reid of Deutsche Bank tells clients:
In the U.K. the Scottish question will remain in focus with the SNP just failing to win a majority but still seeing a strong set of results. With the Scottish Green Party they do have a pro-Independence majority.
Optimism over the unlocking of the UK economy may also be lifting the pound some support.
From May 17, pubs, cafes and restaurants will be able to host customers indoors for the first time in months — for groups of up to six or two households.
Cinemas, galleries and the rest of the accommodation sector will also reopen, as hospitality restrictions are lifted due to the fall in Covid-19 infections. This should underpin hopes of an economic recovery this year.
The pound is also benefitting from the weaker dollar, which slid on Friday after a surprisingly weak US employment report. The news that just 266,000 new jobs were added last month has dampened some optimism over the pace of the recovery
European stock markets are set to rally this morning, with investors calculating that weaker jobs growth means central bankers won’t be rushing to end their stimulus measures.