Brexit ‘no’ a growing probability: Julius Baer
The odds on the UK rejecting the chance to leave the EU have narrowed according to an economist at Swiss investment giant Julius Baer.
After “carefully following” voting opinion polls and further data related to the UK’s 23 June Brexit referendum, David Meier, economist at Julius Baer, said that he believes that the probability margin of a Brexit has dropped, particularly over the past few days.
“While online voting intention polls are still very narrow, polls conducted by phone, widely considered as superior in quality, indicate a considerably large lead of the “stay in the EU” camp,” said Meier.
Baer pointed to what he call as “the ominous British gambling scene”, as another pointer towards a narrowing of the odds of a ‘no’ to Brexit (see graph). As a result he has reduced the company’s assessment of the Brexit probability to 30%, the lower end of its previously reported band of a 30%-40% probability.
Pound forecast trimmed
“Accordingly, we trim our British pound forecast to a less aggressive EUR/GBP 0.81 for both the 3 and 12-month perspective,” added Meier.
“To keep in mind: our view on the GBP remains bearish beyond the Brexit referendum.”
He added that based on “structural weakness” such as the UK’s large current account deficit, macroeconomic factors such as fading UK growth momentum and a slower return of inflation keeping Bank of England rate normalisation delayed, he does not buy into a lasting relief recovery after a “no” vote.
“A “no” to the Brexit remains our base case and our GBP outlook is bearish beyond 23 June,” he said. “A case for hedging against the tail risks of a Brexit remains, under consideration of personal risk preferences and meanwhile higher hedging costs.”