GBP: Low turnout will increase Brexit risk - MUFG

Lee Hardman, Currency Analyst at MUFG, notes that the pound is continuing to weaken and becoming more volatile ahead of the EU referendum on the 23rd June.

Key Quotes

“The latest online poll carried out over the weekend by the pollster Opinium revealed that support to leave stood at 43% compared to 39% who wanted to remain. Of the 18% of people who said they were still undecided, when pushed most said they were leaning towards remain.

The poll highlighted as well one of the main problems for the remain campaign, which is that support to remain is highest amongst the young but that they are less likely to turn out to vote. In the 18-34 age group, 53% said they wanted to remain compared to 29% who wanted to leave but just over half said they were certain to actually go out and vote.

The Netherlands is also holding a referendum this week on the 6th April which may garner some market attention. The Dutch parliament has already backed the EU association agreement with the Ukraine that removes trade barriers. An association agreement must be ratified by all EU member states.

However, Eurosceptic activists succeeded in triggering a referendum after securing about 450k signatures. The referendum is not legally binding but if there is a high turnout and the association agreement is rejected it will increase pressure on the Dutch government. The developments could be seized upon by Eurosceptics in the UK as well.”