With the Brexit polls narrowing it seems like the referendum results are too close to call, which in turn is driving volatility in the currency markets as different polling results are released.
Polls from both ICM and YouGov, showed that the campaign for Britain to leave the European Union has taken a 4-5% lead in the lead up to the June 23 Referendum, which sent sterling towards three-week lows against the US dollar. Of the eight most recently published surveys, one opinion poll was tied, two showed the ‘Remain’ camp ahead and five have showed the ‘Leave’ camp in the lead, including a TNS online poll published on Monday and two previous ICM polls published last Tuesday.
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Below are some opinions of 5 top financial institutions on the potential impact of a Brexit on sterling.
- Goldman Sachs: Estimates drop in the trade-weighted GBP of 15-20%. If the move was uniform across currency pairs, this would take GBP/USD to around 1.15-1.20 and GBP/EUR to around 1.05-1.10
- Reuters: none of the 45 strategists polled by Reuters said the economy would benefit if the “Out” campaign wins.
- UBS: Swiss bank UBS say Sterling could fall to parity with the euro if Britain votes to leave the European Union. UBS states the chance that the UK will leave the EU stands at around 40 per cent.
- HSBC: GBP could lose 20 per cent of its value against the US dollar, the bank believes, sending it towards $1.10 – a level not seen since 1985, when the UK was contending with issues including the miners’ strike.
- Deutsche: forecasts in a “benign” environment that GBP/USD of $1.28 by the end of 2016 and $1.15 by the end of 2017. In a “non-benign” or “worst-case scenario”, sterling may depreciate an additional 10 per cent.
Images reflect current banks forecasts for currency into early next year. These predications fluctuate regularly based on various data releases. The below strongly suggests the major banks are working on baseline scenario that we will remain in the EU.