"Monetary and fiscal policy would then need to tighten to prevent a vicious circle of rising inflation and an ever-weaker currency."
The Pound is up at the start of the new week as some political risk premium is washed out of the currency, here analysts give their views on the latest action in the currency and what the future holds regarding a Scottish independence vote.
The British Pound was an outperformer on global foreign exchange markets on Monday May 10 as investors welcomed an easing of UK political risks.
The British Pound faces a double-header of risk events over coming days with the Bank of England's Thursday policy meeting potentially setting the tone for how May plays out.
Foreign exchange analysts are saying the lacklustre performance of the British Pound during April could be linked to rising political uncertainties linked to the May 06 polls due to be held in Scotland.
The British Pound has suffered notable losses during the first week of April, declines that come just weeks ahead of crucial Scottish parliamentary elections that are expected to result in a big win for pro-independence parties.
Research conducted by the Centre for Economic Performance shows that the incomes of Scots would likely fall sharply in the years following a split away from the rest of the UK, while the negative impact of trade disruptions would likely be three times that of the disruptions resulting from Brexit.
The British Pound has endured years of underperformance - valued well below fair-value - thanks to political and medical upheaval, specifically the 2016 EU referendum result, ensuing Brexit negotiations and the onset of the covid-19 crisis in 2020.
Scotland will need to enact significant austerity measures were it to exit the United Kingdom argue analysts as the prospect of Scotland leaving the United Kingdom emerge once more.
Were Scotland to divorce from the rest of the United Kingdom they could struggle to gain entry into the European Union owing to the country’s notable budged deficit.
Could a 'Scotxit' follow a Brexit?