Brexit Polls and Markets Disagree

Britain entered the final day of campaigning before its referendum on European Union membership with opinion polls and financial markets at odds about the outcome.

Investors are piling money into bets on a victory for the “Remain” campaign, led by Prime Minister David Cameron, in Thursday’s plebiscite. The pound has surged to a five-month high and European stocks have posted their biggest three-day gain in almost a year, with the U.K.’s benchmark index poised to erase its monthly decline. Bookmakers have shortened their odds on a “Remain” win.

Polls, meanwhile, say the race is too close to call after a swing toward the “Leave” campaign came to an apparent halt last week following the murder of Labour Party lawmaker Jo Cox, a supporter of staying in the EU.

“Rising anticipation that ‘Remain’ will win the vote is driving the market,” said John Plassard, a senior equity-sales trader at Mirabaud Securities in Geneva. “Even if polls are close, people are paying more attention to the bookmakers because that was a much better predictor in past referendums.”

The British currency is already trading at levels economists forecast it would reach immediately after a decision to stay in the EU. Sterling was up 0.1 percent at $1.4667 as of 9:19 a.m. in London, while the median estimate in a Bloomberg poll of economists earlier this month was for it to trade in a range of $1.45 to $1.50 the day after a “Remain” victory.

European equities, which tumbled to a February low last week, just posted their biggest three-day jump since August. Britain’s FTSE 100 Index has rebounded 5.1 percent from its low and is close to erasing its monthly loss. An index of betting flows compiled by Oddschecker shows the chance of Brexit has fallen to 25.5 percent from 43 percent since June 14.

Less than 24 hours before voting booths open, both sides of the campaign are still assuming there’s all to play for, and making emotional appeals to the electorate. A record number of Britons, 46.5 million, have registered to vote, according to the Electoral Commission.

With different polls putting each side ahead, the BBC held a debate Tuesday evening at Wembley Arena in London, where an audience of 6,000 cheered and jeered as advocates of leaving and remaining in the 28-nation bloc confronted each other. The fiercest arguments were within the governing Conservative Party. Both former London Mayor Boris Johnson and Energy Minister Andrea Leadsom, arguing for “Leave,” were confronted by the leader of the party in Scotland, Ruth Davidson.

“You are being asked to make a decision that is irreversible, we can’t change, we wake up on Friday and we don’t like it and we are being sold it on a lie,” Davidson said. “They lied about the cost of Europe, they lied about Turkey’s entrance to Europe, they lied about the European army,” she told the audience. “You deserve the truth.”

Johnson urged the nation to make Thursday “our country’s independence day.”
“They say we can’t do it,” he said. “We say we can. They say we have no choice but to bow down to Brussels. We say they are woefully underestimating this country.”

The intra-Conservative discord highlighted the challenges Cameron faces uniting his party even if “Remain” wins out. Sayeeda Warsi, a former chairman of the party, this week accused Justice Secretary Michael Gove of propagating “lies” about the EU, the latest in a string of increasingly personal attacks exchanged by senior Tories during the campaign.

The “Leave” camp had one key message in the TV debate — “take back control” — and hammered it home repeatedly. “I’m passionately a believer in immigration, but it’s got to be controlled,” Johnson said.

The “Remain” side focused its fire on Johnson in particular. His successor as mayor of the multicultural capital, Labour’s Sadiq Khan, accused him of running “Project Hate” over immigration.

Cameron told Wednesday’s edition of the Financial Times that the race was “very close — nobody knows what’s going to happen.”

The “Remain” campaign emphasized its message of the economic risks of a Brexit. Wednesday’s Times newspaper published a letter from 1,285 leaders of businesses employing 1.75 million people, saying that “Britain leaving the EU would mean uncertainty for our firms, less trade with Europe and fewer jobs.”


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Dean Popplewell

Dean Popplewell

Vice-President of Market Analysis at MarketPulse
Dean Popplewell has nearly two decades of experience trading currencies and fixed income instruments.
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