Pound crisis: Traders fear sterling chaos if Sturgeon's push for independence succeeds

Strategists were speaking after a new poll suggested the SNP was on course to win an 11-seat majority on May 6, a result which would strengthen First Minister Mrs Sturgeon’s case for a second independence referendum. Stephen Gallo, European head of currency strategy BMO Capital Markets, suggested shockwaves would also be felt across the Square Mile, fearing investors would probably steer clear of British stocks.

He explained: “Come early May the markets will wake up to this and probably trade the size of the majority or the end result.

“The stronger Nicola Sturgeon’s position is, the more headline risk there’s going to be over the next three to six months regarding this issue.”

The pound has been steadily rising in value since Boris Johnson agreed to his post-Brexit trade deal with the EU, although it has fallen back a little in recent days.

Nevertheless, it is currently valued at 1.15 euros, and rose as high as 1.18 at the start of the month - its highest level in well over a year.

The currency’s performance versus the dollar is even more striking, with sterling currently valued at $1.37, having hit $1.40 in February - its highest value since April 2018.

Sharon Bell, a strategist at Goldman Sachs, said: “Political uncertainty, coming straight after five years of Brexit uncertainty, would be unlikely to encourage global investors back to UK stocks.”

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The SNP currently has 61 seats in the Scottish Parliament, having fallen short of an overall majority in 2016.

As a result, Mrs Sturgeon’s party rules as a minority government.

However, an Ipsos Mori poll for STV News published this week, based on interviews with 1,038 people living in Scotland aged 16 and over between March 29 and April 4, suggests that the SNP will pick up 70 seats.

The Alba Party, launched by Mrs Sturgeon’s predecessor - and political enemy - Alex Sturgeon has failed to make a significant impression.

Jordan Rochester, a currency strategist at Nomura, said the City was monitoring events closely.

He added: “It matters more when we actually get a date of another proposed referendum, as then the market will foreign exchange hedge that event risk.”

Nevertheless, he suggested any negative impact on the pound would be limited unless the SNP dramatically beats expectations.

Such a result would likely crank up the pressure on UK Prime Minister Boris Johnson significantly to accede to demands for a so-called IndyRef2.

Mr Rochester the vaccine rollout was a bigger factor but agreed the market would be affected if another referendum was held.

Speaking to Express.co.uk at the weekend, Professor David Blake, a Professor of Economics at City, University of London, warned the real cost of going it alone would be felt north of the border, predicting it would deliver a £26billion annual hit to GDP.

He added: “The UK has just experienced a 10 percent reduction in GDP due to Covid. The largest fall in 300 years.

“The UK economy will bounce back from this.

“Scottish independence means a permanent reduction in GDP of 15 percent, which is 50 percent more than Covid.

“The Scottish economy will never recover from this.”

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