David Cameron thinks it could bring about another world war, EU Council President Donald Tusk reckons it could spell the end of Western civilisation and England football fans think it’s more important that the Euro 2016 Championship. Yes, of course, we’re talking about the Brexit referendum again.
Financial markets opened this week in a particularly jittery mood with something called sterling implied volatility surging. To explain briefly, this is a measure of the market’s uncertainty over where GBPUSD will be in three months’ time, derived from the price of options to buy or sell GBPUSD three months from now. The chart below gives today’s surge a bit of historical context.
Financial markets are known for taking a lead from betting markets which have shown a definite shift towards “Leave” of late. The chart below from politicalodds.bet illustrates the move.
All this is very interesting because the almanis crowd is still leaning further towards “Remain”. The chart below shows the almanis “Remain” probability as a daily average along with some broad trading ranges that help, I think, describe the broad consensus of our crowd.
For my own tuppence worth, I am fully backing the almanis crowd in this little disagreement. Not only does a more sophisticated view of the latest polls suggest that the FX and betting markets are overblowing the chances of a “Leave” vote, it is re-enforced by a more forward-looking approach to forecasting.
Every major referendum that we can look at in recent history breaks back towards the status quo in the final days before the vote. Also, the UK government and EU authorities can, if they are so minded, still launch a grand offer to the British people in the manner that the UK government offered made “The Vow” to the Scottish people as the 2015 Scottish independence referendum approached. Leave need big leads at this stage of the campaign if they are to be at all confident. They don’t have them. At least, not yet.