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Pound faces ‘chaos’ next year – analyst

Ab Currencies
Pound is set for freefall after Brexit, with or without agreement.

Dollar weakness has shored up the British pound this week, analysts said, but Brexit, combined with an expected push by some Scottish leaders  for independence are expected to make sterling volatile.

“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.

For now, the pound is holding steady at 1.33 to the dollar, but has dropped to 1.11 against the euro .

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

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

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

Both sides are calling on the other to compromise over fishing, state aid and how to resolve any future disputes.

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 Swiss franc rose to a five-year high on Monday against a fast-falling dollar, creating a headache for the Swiss National Bank as it battles to keep a lid on its currency.

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