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    GBP/USD Set for Third Weekly Gain, But Next Week's Scottish Election Poses Risk

    Abstract:GBP/USD Set for Third Weekly Gain, But Next Week's Scottish Election Poses Risk

      

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      GBP/USD eased from highs Thursday, but looks set for a third-straight weekly win underpinned strong recovery in the UK, but the Scottish elections next week pose a risk, analysts say.

      GBP/USD rose 0.03% to $1.3937 and further advances will likely put resistance in focus, but dips will short-lived.

      “[A]ttention is on key resistance, which remains 1.4018, the March high,” Commerzbank (DE:CBKG) said. “Near term dips are expected to be shallow and an upside bias is preserved above the uptrend at 1.3707.”

      The move higher in the pound has been supported by the easing of Covid-19 restrictions that has bolstered the UK's recovery. But voters across Scotland will head to the polls on May 6 that could lead to a referendum on independence that could spark a wobble in the GBP.

      “If the Scottish Nationalist Party wins an overall majority in the 6 May Scottish elections, pressure for a referendum on independence will intensify, which could cause some GBP underperformance on the crosses,” ANZ said in a note, according to FXStreet.

      ANZ is forecasting GBP/USD rising to 1.46 by year-end, but large gains against the euro are likely to be hard to come by as the recovery in mainland Europe will gather pace as vaccine rollouts continue. Nicola Sturgeon, First Minister of Scotland for the last six years, needs to win a majority of 65 seats to bolster her call for a referendum.

      Polls are pointing to pro-independence parties achieving a supermajority in Scotland's parliament.

      But some see the UK Prime Minister rejecting any call from Scotland for a referendum.

      “In such a scenario, Scotland would unilateral enact a referendum, which wouldn't be recognized as legal by the UK parliament in London, setting the scene for a stalemate scenario, similar to that been seen in the case of Catalonia versus Madrid,” Action Economics said in a note.

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