So there we have it: after months of fevered speculation, Nicola Sturgeon has announced she will begin the process of seeking a second Scottish independence referendum.
Although it fell last week, when the rumours started in earnest, the pound barely shrugged at Sturgeon's announcement today.
Here's what analysts had to say.
|1. "Cocktail of uncertainty"|
"This bombshell development comes at a time where speculations have heightened over Theresa May potentially triggering Article 50 on Tuesday. With Sturgeon on a quest to obtain permission from the Scottish Parliament for a second referendum via the Section 30 process, the rising anxiety may expose sterling to downside shocks.
"With the Brexit launch around the corner participants most likely will remain edgy from the terrible cocktail of uncertainty, revived hard Brexit fears and concerns of a Scottish referendum. Markets will be paying very close attention to how the Brexit negotiations take place with any early complications exposing the unstable Sterling to further losses… the current technical bounce on the pair could provide a foundation for sellers to attack with targets stretching back towards 1.2100."
– Lukman Otunuga, FXTM
|2. "Not a key risk"|
"A second referendum for Scotland is… not a key event risk for UK asset markets right now for a couple of reasons: firstly, Nicola Sturgeon didn’t give an actual date for this referendum, it could happen sometime between 2018 and 2019, which is probably too far in the future for the markets to start worrying and pricing in the break up of the United Kingdom. Also, the latest opinion polls suggest that a second referendum would go the same way as the first, and the majority of voters would choose to stay in the United Kingdom.
"While opinion polls still can’t be fully trusted, it’s enough, at this stage, to keep UK markets calm."
– Kathleen Brooks, City Index
|3. "Brexit will be a politically messy process"|
“Nicola Sturgeon’s announcement to seek a second referendum on Scottish independence does not really come as any surprise and highlights that Brexit will be a politically messy and divisive process. Sterling appears unmoved on the news and has, in fact, rebounded off last week’s lows this morning.
"We continue to expect UK growth to be vulnerable given the likely squeeze on real consumer income this year, together with overall uncertainty around Brexit. We are therefore maintaining our underweight exposure to UK assets (equities, bonds on a duration basis and sterling). Until we get more clarity on the political and economic outlook, we are not yet ready to repatriate assets back into the UK.”
– Michael Stanes, Heartwood Investment Management
|4. "All eyes on the Fed"|
"Curiously this Monday afternoon saw some pretty major news completely ignored by investors seemingly firmly focused on the Fed.
"While this isn’t entirely unforeseen news, and has plenty of roadblocks in its way, it is remarkable how little reaction there has been on the markets, especially from the pound. Instead of indulging in volatility, sterling held on to its 0.4 per cent and 0.6 per cent gains against the dollar and euro respectively, suggesting that if there is another referendum investors are currently confident that Scotland would choose to remain as part of the UK."
– Connor Campbell, SpreadEx
|5. "There are four reasons sterling hasn't reacted"|
"We would have expected [the pound] to have fallen on the back of this news, although the currency looks to be holding onto its prior gains against the [euro] and [dollar]. We identify four potential reasons for why this may be the case:
"[First], the still relatively low implied probability of an independent Scotland given the high legislative and economic barriers… [Second], FX spot markets typically have a narrow attention span when it comes to political risk events… [Thirdly], recent build in short [sterling] positions may reflect markets anticipating heightened near-term UK political risks.
"[Finally, sterling] is a lot cheaper following the post-Brexit adjustment (and the last Scottish referendum). In nominal trade-weighted terms, GBP is down around 14 per cent since both the last Scottish independence referendum and Brexit vote. Additional political risks (especially if not immediate) are likely to have a diminishing marginal effect on a currency already trading at historically cheap levels."
– Viraj Patel, ING