UK: Final polls marginally favour “remain” ahead of Brexit referendum - MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the pound has remained stronger in the Asian trading session after recording its largest one day advance yesterday since 2008.

Key Quotes

“The estimated probability of Brexit according to Predictwise has fallen sharply to around 25% from 40% late last week. Telephone polls since late last week have revealed evidence of a late swing back in public support towards “remain” although they are still signalling that the referendum result remains finely balanced.

Our own weighted average measure which attaches  a greater weight to the phone poll results reveals that support for “remain” and “leave” is currently tied at close to 50% each over the last six phone and online polls. Overall it still just tips the balance in favour of a vote for “remain” being more likely based on the assumption that the public is more likely to vote maintain the status quo in the referendum than in the polls, and that “unknown” poll respondents are expected to be more likely to vote “remain” as well. However, we don’t share the market’s current confidence that the probability of Brexit is as low as 25%.

While the outcome of the referendum remains unclear, we are more confident that the pound will remain volatile both in the run up to and in initial aftermath of the release of the referendum results. The pound is likely to move significantly both in the event of remain or leave although as the perceived probability of Brexit is now judged as relatively low, the pound will be even more sensitive if there is a vote to leave falling more sharply. Short pound positioning built up so far this year in advance of the referendum could still see the pound staging a larger than expected relief rally if the UK votes to remain within the EU. 

The latest opinion poll results released overnight were mixed. The final ORB phone poll continued to reveal that the public on balance supports remaining within the EU which remained steady at 49% among the entire electorate compared to 47% for “leave”. The lead for “remain” has been narrowing highlighting the referendum outcome is finely balanced and will go down to the wire.

More interestingly, the ORB poll found that the “remain” campaign has seen a significant boost in support among definite voters opening up a seven percentage point lead (“remain” at 53% vs. 46% for “leave”). It marks an eight-point reversal from last week’s ORB poll results (“remain” at 48% vs 49% for “leave”). It was the first time in almost exactly a month that “remain” had such a large lead amongst those certain to vote. The ORB estimate of turnout at the referendum has increased by 3 percentage point to 65% driven in part by a significant increase in the number of “remainers” who are certain to vote. The ORB continues to stress that turnout will be crucial in determining the result.

A new study by leading pollster John Curtice for the National Centre for Social Research which used new polling methodology recommended by an inquiry into what went wrong with the general  election polls  last year, has found that 53% of people will be voting to “remain” within the EU compared to 47% to leave. However, he did stress that the outcome “looks so close that any lead should treated with caution”.”