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The latest “Poll of Polls” on voting intentions for the UK referendum from NatCen Social Research is interesting.
   
PM Bulletin   
  
This can be seen by going to whatukthinks.org where the methodology is explained fully. But in a nutshell the “Poll of Polls” is “based on the average share of the vote for ‘Leave’ and ‘Remain’ in the six most recent polls of voting intentions in the EU Referendum”. The chart includes data collected up to 15th June.
   
As we can see, there’s been a slight but significant downturn in the lead that “Leave” has over “Remain”. Of course, there are still plenty of potential voters who describe themselves as “undecided.”
   
But the bookies suggest a different result. Earlier today the implied probability of a “Remain” vote according to Betfair rose to 67%. Yesterday morning it was coming in around 60%.
  
Here’s Betfair’s chart showing the flow of money for punters betting in favour of staying in the EU:
  
  PM Bulletin
  
As we can see it’s been quite volatile. Yet as far as I can work out the bookmakers have consistently had the “Remain” campaign ahead even as the polls now consistently say “Leave” has a significant edge. Who’s right? Only time will tell, although it’s fair to say that it’s generally safer in trying to predict such outcomes to “follow the money.
  
That being the case, what about the serious money? For that we should look at the FX markets, and we’ll simplify matters by concentrating on the GBPUSD:
  
PM Bulletin
  
As of Friday (17th June) afternoon, cable is still above its February lows when it broke below 1.4000. With some analysts suggesting that sterling could drop to 1.2000 or below against the dollar if the UK votes to leave, the market really isn’t pricing in such an eventuality. This is particularly the case given that a number of analysts expect cable to rally to around 1.5000 on a “Remain” vote. Assuming that 1.2000/1.5000 is a sensible range, then a cable rate of 1.3500 is smack-bang in the middle and would suggest the market is pricing in a 50:50 chance either way. Consequently, I’d say the FX market is currently betting on the UK staying in the EU.
  
I appreciate this analysis is very simplistic and full of assumptions. But it still suggests the weight of money reckons the UK will stay in. Let’s see where cable is trading on Thursday night. On Friday we’ll know if the polls or the bookies were right. 
  
David:  Who’s right? Only time will tell, although it’s fair to say that it’s generally safer in trying to predict such outcomes to “follow the money.”
  
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Posted by David Morrison

Tagged: Bulletin PM

Category: PM Bulletin


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