Brexit: in the Balance
Next week’s referendum on the UK’s continued membership of the European Union hangs in the balance. Recently, opinion polls have begun to suggest that an ‘out’ verdict from UK voters is a genuine possibility. Adding to the uncertainty however, bookmakers’ odds continue to show ‘remain’ as the most likely outcome. While the task of gauging what the electorate will do is proving hugely challenging, it is crystal clear what financial markets think. Since 9th June, when an opinion poll from research group ORB gave the Leave campaign a 10-point lead*, beginning a run of surveys showing Leave ahead by varying degrees, investors have voted with their feet. The FTSE 100 index of the UK’s largest companies has dropped by 6% in just four trading days, sterling’s effective exchange rate has lurched lower and the yield on 10-year gilts has reached a record low, as investors have preferred the traditional safe haven of UK government backed bonds.