James Kim@Saxo
James Kim, sales trader at Saxo Capital Markets Australia, examines trading strategies during week 43 in a technical analysis of charts for forex, indices and commodities.
Article / 21 June 2016 at 9:55 GMT

Daily Shot: Brexit odds at 25%, pound comes out swinging Team / Saxo Bank
  • Bookmakers place Brexit odds at 25%
  • Pound surges as Remain polls strengthen
  • GBP implied volatility tumbles

By Walter Kurtz*

We begin with the latest Brexit-driven market developments.

1. The weekend polling brought the European Union referendum averages back to even odds.

2. The betting markets are now trading Brexit probability at around 25%. 

3. The British pound shot up by over 2% in response to reduced Brexit expectations. This was one of the largest one-day increases in a while. 

4. The British pound implied volatility (index shown below) fell sharply. 

5. Bitcoin declined as well, but Bitcoin enthusiasts swear that this is not Brexit-related. It's the Bitfinex exchange outage or an undersubscribed Bitcoin auction. 

It can't be related to the EU referendum because if Brexit doesn't happen, Bitcoin is likely to fall further. And that's simply unacceptable for Bitcoin enthusiasts who are all long the cryptocurrency. 

6. The "Bremain" probability is highly correlated with the British pound. This binary event is driving all major markets these days.
7. Similarly, Bremain seems to be correlated with European share prices. 

8. Here is how Brexit compares with major (historical) political risks in terms of media attention.
9. Equity fund outflows from the UK have worsened lately. Will this trend reverse if the UK remains part of the EU?   

 — Edited by Michael McKenna
* Walter Kurtz is an alias 

** This is an abridged version of the Daily Shot. To subscribe to the full version, link to the Daily Shot and select the appropriate command. E-mail addresses are never shared with anyone.


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