GBP: BLACK WEDNESDAY MUST BE AVOIDED

Good morning

I remember only too well that day. 16 September 1992 I had been trading FX options for around 9 months (start of my career) when  GBP left the ERM and what later became known as Black Wednesday. Aptly put is was “hell” Wednesday.

Come Thursday (vote), Friday (London trading) – I can assure you we could see history itself should the YES vote win. I cannot impress the importance of the vote and the result. The NO vote must prevail but not only prevail it needs to smash the YES vote into oblivion. I as a rational intelligent person cannot for the life of me see any credence  or economic sense in what Alex Salmond and his team are trying to sell. There is not a Bank, FTSE 250 Company, or financier that has come out and said a YES vote will be good financially for Scotland (not to mention the UK). A union is a union, just like the EU, USA, and Canada etc. Break even a small part and it is the start of a leak that could take years/generations to fix. The YES camp must wake up and realise that their vote will in all likelihood cripple and bankrupt Scotland not to mention their off-springs well-being. This is a game changer make no mistake. There is not much more that can be said by our present leaders both in Govt. and the private sector to prove categorically that the union of the UK MUST STAY INTACT.

GBP/USD has seen some strong resistance at 1.6275. A NO vote will hit the pound so much it will tumble through last week’s Low at 1.6050. A psychologically strong 1.6000 level will probably be tested and broken too. This could open up a run on the GBP falling to mid-1.50’s before the BOE intervenes (they will have to) and with it Black Wednesday all over again. Not to mention stocks!!! Already £17bn has been pulled out the UK market, an amount not seen since 2008 and the Lehman Bros. collapse. On the other hand, positive news (NO wins) will push GBP/USD higher and probably to 1.6460 -1.6575 resistance. GBP/USD If rises above this resistance opens the way to 1.6720. A jump above 1,6720 will signal the potential to soar to 1.6820 – 1.6880 next. Break that and we head back to 1.7190 highs of 2014.

I am “cautiously optimistic” that the Scottish people will put reality before pride. I believe that while they are massively patriotic and would love an independent country, the numbers just don’t add up. Financially they will be ruined. How will this help their cause? Simply put they will vote NO in the booth because the fear of potentially seeing their pensions and businesses go down the tube will be too much to bear. Unless they ACTUALLY accept this will happen (rather than if), they will be making the gravest of decisions. Long live the union, long live the GBP, long live the UK!!!

Have a good day ahead and let’s hope our brothers and sisters in Scotland vote to keep the UK one.