Well, I am not sure if this is actually used to scare the voters, but what do you think will happen the Yes Campaign wins?
Will we be affected somehow by the aftermath?
Singapore might get a bit of an equity selloff at first but nothing worse than that.
The real effect will be on GBPUSD, UK gilts, short-sterling STIR futures, and UK equities:
- At the moment, the market's pricing for the Bank of England to start hiking rates in the next few months (even before the Fed), because the economy is picking up and Mark Carney (who runs the BoE) has made reassuring noises about moving away from the zero bound. The uncertainty around a Scottish separation will push back the first hike, and presumably slow the predicted pace of hikes. That means short-sterling futures will blip higher (though they've already moved a long way: LZ15 has gone from 98.30 to 98.70 in the last couple of weeks, though it's retraced to 98.55 in the last week);
- Gilt futures have ground higher for the same reason. I'm a little bit more dubious about this move, because one of the outstanding issues in the separation will be how much debt Scotland takes over from the rest of the UK. If Scotland takes no debt with it - as looks likely - then that will leave England with a higher debt-to-GDP ratio, making gilts a bit less attractive;
- UK equities will presumably trade lower because UNCERTAINTY!;
- GBPUSD will trade lower for the same reason. Nobody knows whether Scotland will have a formal currency union; a Scottish pound; the euro; or something entirely different, so GBP will blip lower because of the increased uncertainty (and also because lower interest rates - see above - will make GBP a less attractive currency to hold).
Conversely, if the "no" vote gets up, everything will pretty much go back to where it was before mid-August when the "yes" option started making inroads: cable rockets higher, short-sterling plunges, gilts tick a bit lower, UK equities maybe a bit higher but probably basically unch'ed?
