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26 Feb 2016
GBP: Time to buy? - Rabobank
Jane Foley, Research Analyst at Rabobank, suggests that following its plunge at the start of the week GBP/USD is attracting a few bids and is settling close to the psychologically important 1.40 level.
Key Quotes
“The next round of opinion polls regarding the UK referendum on EU entry is likely to set the pace for next week’s trading. That said, while GBP is clearly still very vulnerable a more pragmatic tone already appears to be tentatively emerging in response to the combined signals from opinions polls and bookies.
The EU Poll of Polls published by What UK Thinks has consistently indicated that the Remain camp remain ahead by a comfortable margin. Its latest indication incorporates polls conducted between February 13 and 25 and show that the ‘Remain’ vote is ahead with 55% vs. 45%. Not all opinion polls are pointing to a win by the ‘Remain’ Camp. That said, according to The Telegraph, of the 20 opinion polls published since Christmas twelve have suggested that the UK will vote to remain in the system. Having failed to predict the results of the last general election, opinion polls do not have a good reputation in the UK currently. That said, the results of the enquiry into that particular failure may address some of the short-falls.
The performance of the pre-election pollsters suggest that telephone polls could be more accurate than internet based ones. A Survation telephone conducted on the eve of the UK general election produced vote shares for the two main parties to within 0.6% of the actual result. The Telegraph maintains that so far all of the phone polls on Britain’s membership suggest more people will vote to remain in the EU, by a significant margin. The odds offered by the bookies also indicate that the ‘Remain’ Camp is in the lead.
Any decline in the risk of a Brexit would clearly be good news for sterling. For the EU it would also be a welcome relief. Data compiled by former UK peer and pollster Lord Ashcroft suggests that 60% of those polled in the other EU 27 countries would like the UK to remain within the fold. The greatest enthusiasm for the UK’s continued membership comes from more pro-EU countries and those with the highest number of migrants working in the UK. Countries with stronger trading ties were also supportive of continued UK membership of the EU. Brexit, however, is not the only threat to EU harmony.
The current immigration crisis continues to threaten the Schengen agreement which some commentators and even some politicians, have described as potentially the start of what could deteriorate into an existential threat for the EU as we know it. EU leaders are due in Brussels on March 7 for an emergency EU-Turkey summit on the issue, but there is scepticism as to how much progress can be achieved. Austria, Hungary and Belgium have already taken unilateral action to impose border controls and Hungary is threatening to call a referendum on the issue to re-state its sovereign right to oppose EU quotas on immigrant numbers. Against this backdrop the EUR has lost ground against all other G10 currencies this week with the exception of the GBP.
How the EUR will fare in the face of continued threats to the EU both from Brexit and the immigration crisis is not completely clear cut. The Eurozone has a large current account surplus and the EUR could find support from a move back to core Eurozone assets. In the short-term, however, concerns for EU coherence combined with a signs that panic levels in sterling are subsiding suggests that upside potential could be capped close to this week’s high around the 0.79 area. Near-term resistance for GBP/USD lies at 1.4080.”
Key Quotes
“The next round of opinion polls regarding the UK referendum on EU entry is likely to set the pace for next week’s trading. That said, while GBP is clearly still very vulnerable a more pragmatic tone already appears to be tentatively emerging in response to the combined signals from opinions polls and bookies.
The EU Poll of Polls published by What UK Thinks has consistently indicated that the Remain camp remain ahead by a comfortable margin. Its latest indication incorporates polls conducted between February 13 and 25 and show that the ‘Remain’ vote is ahead with 55% vs. 45%. Not all opinion polls are pointing to a win by the ‘Remain’ Camp. That said, according to The Telegraph, of the 20 opinion polls published since Christmas twelve have suggested that the UK will vote to remain in the system. Having failed to predict the results of the last general election, opinion polls do not have a good reputation in the UK currently. That said, the results of the enquiry into that particular failure may address some of the short-falls.
The performance of the pre-election pollsters suggest that telephone polls could be more accurate than internet based ones. A Survation telephone conducted on the eve of the UK general election produced vote shares for the two main parties to within 0.6% of the actual result. The Telegraph maintains that so far all of the phone polls on Britain’s membership suggest more people will vote to remain in the EU, by a significant margin. The odds offered by the bookies also indicate that the ‘Remain’ Camp is in the lead.
Any decline in the risk of a Brexit would clearly be good news for sterling. For the EU it would also be a welcome relief. Data compiled by former UK peer and pollster Lord Ashcroft suggests that 60% of those polled in the other EU 27 countries would like the UK to remain within the fold. The greatest enthusiasm for the UK’s continued membership comes from more pro-EU countries and those with the highest number of migrants working in the UK. Countries with stronger trading ties were also supportive of continued UK membership of the EU. Brexit, however, is not the only threat to EU harmony.
The current immigration crisis continues to threaten the Schengen agreement which some commentators and even some politicians, have described as potentially the start of what could deteriorate into an existential threat for the EU as we know it. EU leaders are due in Brussels on March 7 for an emergency EU-Turkey summit on the issue, but there is scepticism as to how much progress can be achieved. Austria, Hungary and Belgium have already taken unilateral action to impose border controls and Hungary is threatening to call a referendum on the issue to re-state its sovereign right to oppose EU quotas on immigrant numbers. Against this backdrop the EUR has lost ground against all other G10 currencies this week with the exception of the GBP.
How the EUR will fare in the face of continued threats to the EU both from Brexit and the immigration crisis is not completely clear cut. The Eurozone has a large current account surplus and the EUR could find support from a move back to core Eurozone assets. In the short-term, however, concerns for EU coherence combined with a signs that panic levels in sterling are subsiding suggests that upside potential could be capped close to this week’s high around the 0.79 area. Near-term resistance for GBP/USD lies at 1.4080.”