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Implications of Scotland leaving the UK - ING

FXStreet (Łódź) - The ING team of analysts discuss the implications of Scotland leaving the UK, ahead of the independence referendum on 18 September.

Key quotes

"Should Scotland choose independence, it will have ramifications for the whole of the UK, creating economic and political uncertainty that will potentially be damaging for both growth and asset prices."

"We still think a ‘no’ vote isthe most likely outcome but our confidence is not particularly high."

"If it is ‘yes’, then the nationalists aim to have everything about the split to be agreed on in 18 months."

"However, monetary union would require fiscal union and banking union which raises questions over the scale of 'economic independence'."

"Bond market details will need to be worked out, with Scotland eventually issuing its own debt, although Scottish borrowing costs are likely to be higher than they are for the UK."

"If Scotland has to introduce its own currency there will be more problems."

"Scotland’s borrowing costs might be even higher even if it walks away from the debt."

"Gains on oil and gas could be offset by the loss of transfer payments."

"Economic sentiment could be negatively impacted while FDI may be hurt BoE rate hikes to be delayed."

"Rate hikes are being priced out and GBP/USD implied volatility curve is heavily inverted."

"A ‘no’ vote should see sterling partially recover. Policy rates will then determine sterling’s path."

"Sterling would drop much further under a ‘yes’ vote."

"Growth and asset price risks are likely skewed to the downside in a ‘yes’ vote."

"If Scotland remains part of the UK, then it could put back talk of independence for decades. Scotland could conceivably lose out if it does not vote for independence."

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