Markets clearly expect the UK to remain in the EU - BBH

Research Team at BBH, notes that there is a nervous calm in the capital markets today as the focus is squarely on tomorrow's UK referendum. 

Key Quotes

“According to a BBC focus group, the left camp won the debate 39%-34%. The last polls show a contest that it too close to calls in that the results are within the margin of error.  The Financial Times poll of polls has it at 45%-44% in favor of Brexit. 

However, the betting markets appear to be telling a different story.  Indicative prices suggest an 80% chance of a victory for the remain camp.  The odds-makers have reportedly seen a strong shift toward the remain camp since June 14.   The events market, PredictIt, also has seen the shift toward remain.  A week ago, one had to "bet" 47 cents to get a $1 if Brexit won.  Now it costs 26 cents. 

In the foreign exchange market, sterling is holding onto most of the gains it scored in the rush from $1.4010 on June 16 to nearly $1.4785 yesterday. The upside momentum has faded, and a consolidative tone has emerged. We would expect to see some more profit-taking on the idea that the new positions have been long sterling.  Early buyers and the speculative activity in the futures market suggest a significant amount of new longs were established in the week through June 14, and momentum traders may choose to lock in profits before the event.   Support today is seen in the $1.4600-$1.4620 area and then $1.4550.”