With hours to go until Britons start voting on whether Britain should stay in the European Union, the verdict from markets on the likely result is emphatic: Remain will win.
Perhaps more precisely, the Remain camp will win or there will be total chaos. More on that in a bit.
Across currencies, bonds, and stocks, the price action over the past week has pointed towards a “Bremain” rather than a “Brexit”.
Prices are far above the lows of last week when there was a sudden surge in polls showing the Leave campaign ahead. They have recovered in some cases to far above where they sat when Leave took its surprise lead.
Some quick charts:
First, the pound. Sterling plunged last week when the Leave campaign took a sudden lead in the polls. But weekend published polling then showed the Remain camp recovering the lead, sending the pound surging back in strength against the US dollar when markets opened on Monday.
It’s a similar story on bond markets. Yields on the benchmark 10-year gilts collapsed last week close to 1%, but have since recovered as market nerves eased and bond prices fell.
The FTSE100 took a similar walk in the valley, tumbling below 6000 last week before a storming recovery over the past three days’ trade.
It’s not just all things British, of course. Here’s the action on the Australian dollar, the world’s fourth-most traded currency and a good proxy for global risk sentiment.
This pricing is of course subject to a big correction in the hours ahead from new information. But as you can see, markets appear to have made up their mind as the Remain campaign established a lead in the polls. One of the interesting features of this referendum, in terms of its markets impact, has been that although the outcome is binary, the impact will be asymmetric: there’ll likely be a small relief rally if the Remain camp stays while a Leave result would result in very large falls for Sterling (Goldman has guessed 11%), the FTSE, and other global risk assets, which would put pressure on central banks to intervene in markets.
Another way to look at it: if Britain does vote to leave Europe, the market is not prepared.
We’ll have LIVE coverage on Business Insider from early tomorrow morning, with indicative results expected around 11am AEST.
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