Expect to see GBP/USD trade above 1.50 on a Bremain decision - SocGen

Kit Juckes, Research Analyst at Societe Generale, suggests that the opinion polls remain too close to call, but the probability of the UK remaining in the EU that is implied by betting odds, is still well above 70%.

Key Quotes

“The view that the uncertainty caused by a ‘Leave’ decision is likely to be avoided, is reflected in more ‘risk-on’ markets, with oil prices back above $50/bbl, commodity prices up and the S&P 500 within 2 ½% of its all-time highs.

The improvement in sentiment over the last 10 days has seen sterling bounce with opinion poll readings. That suggests an asymmetric risk to the outcome once again, with a ‘Leave’ decision more damaging for sterling and risk sentiment than a decision to ‘Remain is positive’. For all that though, the direction of travel remains straightforward.

We expect to see GBP/USD trade above 1.50 on a decision to stay, but would be surprised to see it at 1.55. We still expect to see the other side of GBP/USD 1.35 quite soon after a decision to leave. EUR/GBP is likely to trade over the April high at 0.8120 on a ‘Leave’; but not to break 0.85. On a remain vote, we’d look for 0.75 but not for much more than that, as EUR/USD would be propelled higher.”