Scottish Independence and The Pound: How Sentiment Comes to Bear

The debate surrounding independence of Scotland and the pound is fascinating from the point of view of sentiment. As the Independence Referendum begins, more and more media articles and debate are focused on the subject, and the ramifications on Geo Politics and in consequence the value of Sterling. We can see from the chart below that Sentiment has been flat lining since early July with a significant pull back prior to Sterling’s recent falls.

The press has been full of fear of sterling’s demise into oblivion, as Sterling would lose the North Sea’s Crude deposits, 7 million people and most likely improve the odds of the remainder of the UK leaving the European Union. So from a sentiment perspective we can quantify this fear and how it is affecting price. The chart below shows bursts of fear pushing sterling lower.

What we can learn from this is that although sentiment is commonly used within Algorithms/ EAs, it can also be used to help quantify an economic picture of the mood of the market to help us better manager our trading positions and risk.