Daily analysis 10.06.2016:
The British referendum is in less than two weeks. What are the results of the surveys, and which elements should be significant for the pound market participants? An increase in risk aversion causes the EUR/PLN to return above 4.35.
Most important macro data (CET – Central European Time). Estimations of macro data are based on Bloomberg information, unless marked otherwise.
- 16.00: Initial reading of consumers sentiment index from the University of Michigan (estimations: 94 points).
We have been focusing on the pound's behavior regarding the forthcoming British referendum for many weeks. We have also emphasized that the survey results are determined by a specific methodology used by particular centers, as well as medians presented by the media. Since the day of the referendum approaches, it is worth reminding these elements.
Considering the data published by whatukthinks.org website, as well as the average value for the recent surveys, 49% want to remain in the EU, and 51% want to leave. However, the situation is completely different if we only look at the phone surveys. The European Union supporters have approximately 10% advantage.
On the other hand, the result is approximately tied in online surveys. However, most often the median consists of one or two phone surveys. Thus, it disturbs slightly a general interpretations, although it should theoretically make the result more credible. This goes to show that the advantage is on the status quo supporters side, despite that the results are very often balanced.
The result of the Scottish referendum in 2014 gives hope to the EU supporters in a certain way. One month before the voting, the surveys were showing 4-5% advantage for the supporters of Scotland remaining in the United Kingdom. However, the final result gave them more than 10% advantage.
The article „How accurate are the Brexit polls?” published in today's Financial Times, compares the survey results based on the will of respondents to vote. This comparison may give hope to the Brexit supporters. For example, the ORB phone survey shows that more than 56% of respondents supports the EU. However, if we exclude respondents who are not certain whether they will vote, the advantage is only slightly above 50%.
The situation is similar when it comes to online surveys. The Opinium survey shows that 51% of respondents want to remain in the EU. However, if we exclude respondents who are not certain whether they will vote, the support for status quo goes below 48%.
Today's interview with Ben Page for Bloomberg television may also cast some light on the surveys. The Ipsos MORI Chief Executive Officer estimated that there is approximately 5-6% more EU supporters. Moreover, according to Financial Times the bookie companies data show that there is 72% chances for the United Kingdom to stay within the European Union.
How can all of this translate to the pound's quotations? It is very possible that the closer to the referendum, the more likely that just one phone survey may cause significant volatility on the British currency. Moreover, the pound should definitely be more sensitive for the surveys that are against the base case scenario, which is status quo.
It is extremely difficult to estimate hypothetical behavior of the pound in case of Brexit. However, it seems that the value from one of Her Majesty's Treasury reports may be a proper foothold. The report states that the effects of Brexit may cause a 12% depreciation of the pound. On the other hand, if the United Kingdom remains within the European Union, the report's scenario assumes approximately 5% appreciation. Especially considering that the advantage of the EU supporters will be at the level of 10%.
Large fluctuations on zloty
Even though it should not be a surprise, it is worth noting the clear moves of the Polish national currency caused by the changes in the global sentiment. Yesterday, the dollar was within the range of 3.78-3.79, and today it is testing the area of 3.87. Significant fluctuations not only concern the USD/PLN. The EUR/PLN is strongly dependent on external moves as well. The euro increased by 0.05 PLN in just one day. Considering the PLN quotations from the past two days, the zloty is at penultimate place among thirty-one currencies of the emerging, as well as developed markets.
Significantly stronger sensitivity of the zloty for external factors, as well its close relation with the raw materials currencies such as the South African rand and the Russian rouble, may also concern. If the zloty continues to be seen this way, its situation will remain unstable. In general, this is a negative information for the economy.
The Federal Reserve meeting next week, remains an element of uncertainty as well. If it is less dovish than expected, the dollar, as well as the euro, may return to the levels from the beginning of May.
This commentary is not a recommendation within the meaning of Regulation of the Minister of Finance of 19 October 2005. It has been prepared for information purposes only and should not serve as a basis for making any investment decisions. Neither the author nor the publisher can be held liable for investment decisions made on the basis of information contained in this commentary. Copying or duplicating this report without the written permission from Cinkciarz.pl Sp. z o.o is prohibited.
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