‘80% chance’ of UK staying in EU

The probability of the UK voting next month to exit the EU fell yesterday, as an opinion poll suggested the ‘remain’ side had increased its small lead.

Bookmaker Paddy Power said the chances of a Brexit were now just over 26%, down from over 28% before the release of the ORB poll for the Daily Telegraph.

The probability of the UK staying in the EU rose to 80% from 77%, with the odds attracting three large bets, a spokesman for the bookies said.

Sterling responded by rallying the most in three weeks after the poll suggested 55% of UK voters were in favour of remaining in the EU, while 40% wanted to leave.

The proportion in the remain camp rose from an April survey. The UK will vote on EU membership on June 23. UK government bonds rose as a report showed inflation slowed.

“The pound is finding buyers as polls seem to indicate the remain vote is gaining the advantage over ‘leave’,” said Peter Rosenstreich, head of market strategy at Swissquote Bank.

“We are still cautious ahead of the vote. Unless the polls really show a decisive ‘stay’ lead, rallies in sterling can be seen as an opportunity to sell,” he said.

Sterling rose 0.4% to 78.32p against the euro. It appreciated 0.5% to $1.4475, the biggest jump since April 26. That pared its loss against the dollar this month to 0.9%.

Sterling is seen as undervalued by a net 20% of fund managers, the second highest reading on record, according to Bank of America Merrill Lynch Surveys.

“What we’ve seen over the past couple of months is polls have been slowly trending toward a higher likelihood that the UK does vote to remain within the EU”, BNP Paribas currency strategist Michael Sneyd said.

This gave support for the pound and led to people paring bets the currency will fall, he said.

“That fits with a story that the risk premium on the pound is slowly unwinding,” he said. A separate poll, produced by TNS, showed a contrary result: 38% of respondents want Britain to stay in the EU while 41% said they support an exit.

Sterling stayed higher even after a report showed the annual pace of inflation unexpectedly declined in April.

The rate fell to 0.3% from 0.5% in March, the Office for National Statistics said. Benchmark UK 10-year gilt yields fell two basis points, or 0.02 percentage point, to 1.37%.

Gilts earned investors 5.7% this year to Monday, against a 3.9% return in German sovereign securities.