Talking Points:

- Voting for UK-EU referendum (Brexit) will take place from 06:00 – 21:00 GMT / 02:00 -17:00 EDT.

- First referendum results due out starting after 23:00 GMT/19:00 EDT.

- FX volatility set to remain high with the Brexit vote tomorrow - it's the right time to review risk management principles to protect your capital.

Recent UK-EU referendum polls have recently shown that the ‘Leave’ campaign has gathered momentum in early-June, even taking the lead in some of the more recent polls. However, with the vote due tomorrow, sentiment is neck-and-neck: the latest poll released today (TNS) showed 41% favoring Remain to 43% favoring Leave.

This is the norm, not the exception: nearly every poll in the days ahead of the vote have been within a few percentage points of one another. The referendum on whether the United Kingdom should remain (‘Bremain’) a member of the European Union or leave (‘Brexit’), at least according to polls, is a coin-toss.

Table 1: UK-EU Referendum Polls in June

Markets have a different idea. According to the FX options pricing as compiled by Bloomberg, there is only a 19% chance of a Brexit. According to betting houses, with odds aggregated by OddsChecker, there is only a 25% chance of a Brexit. These views are quite divorced from the sentiment of the broader public, evidently. There’s only one way to resolve this dissonance: getting the actual poll results.

Chart 1: Brexit Odds per Bloomberg

In the UK, private institutions – like hedge funds – are allowed to commission private polls to get a whiff of the results ahead of time. These private polls won’t necessarily be published; but that information will be out there, and there will be market participants who will have the opportunity to act on it. As such, because the private polling results will trickle in throughout the day as the voting takes place, market activity is likely to be erratic all throughout Thursday.

For most of us, who haven’t commissioned private polls, we’ll be waiting to see what the results are as they become official once the voting ends at 21:00 GMT on June 23. Results should come out sometime thereafter, probably around two to three hours in the wake of the polls closing. Depending upon the voting district reporting, the results are likely to vary greatly and thus influence markets.

What should we look for in the voting breakdown? The Leave coalition is expected to perform well in less affluent, rural regions where the demographics are characterized by large numbers of low skilled and/or older voters, such as Eastern England. Meanwhile, the Remain camp is anticipated to score gains in metropolitan and more affluent, urban areas with a large number of university graduates, especially London, Oxford, Cambridge, and Edinburgh and Glasgow in Scotland.

The results from the 382 districts will be come in over the course of the evening/early-morning in the UK, leaving plenty of room for markets to react as the results trickle in.

Local Results Approximate Release Timeline (GMT)

23:30 GMT (6/23) – Sunderland will likely report first, as is typically the case during Parliamentary elections. Given its demographics, it should be expected to see the vote result in Leave. Around the same time, results from Wandsworth (a district in London) should become available, which should be a fairly easy win for the Remain side. Around the same time, data from the City of London will be be released. These will be important indicators for a broader London vote outcome.

23:30-00:30 GMT – We should expect a few results from Northern Ireland, where Remain is in the lead. Then, more results from several Northern and North Western areas should come in. These result should testify whether the reports that traditional Labour areas in the North will break strongly for Leave are true or not.

00:00 GMT (6/24) – We should expect results from Swindon and Oldham. Leave should be aiming to win in Swindon, while the demographic makeup in Oldham leans toward Leave. At around this time we should get the result from Gibraltar where a big win for Remain is expected.

00:30 GMT – The first Scottish results from Stirling and Eilean Siar should be released. Both should be a win for Remain, but again, the margin matters. Underperformance by Remain could be foreboding for the broader results.

00:30-00:45 GMT – Results will come out from Denbighshire and Merthyr Tydfil in Wales, where the vote is fairly even. Given the districts recent economic underperformance relative to the rest of the UK, there may be a slight bias towards Leave. The Leave campaign has focused its efforts in this area to tie these districts’ underperformances to the UK’s membership in the EU.

01:00 GMT – Neath Port Talbot, another Welsh district, is due to declare. Recent economic developments cater to sentiment shifting to a Leave vote. Like in Denbighshire and Merthyr Tydfil, the Leave campaign has painstakingly tied the economic underperformance to the UK’s membership in the EU.

01:00-01:30 GMT – We should expect a flurry of results from across the UK – this is a major release time. Key results to look out for include Basildon, Harlow and Castle Point. If Remain is close or wins in these areas – areas that are typically pro-UKIP, the political party championing the Leave campaign, there is a very strong chance that the Remain effort will post solid wins in Oxford, Westminster, Lambeth, Merton, and other proximate London districts.

01:30 GMT – Barking, Dagenham, and Havering will announce results and Leave will likely win given the demographic makeup of these districts. At the same time, Nuneaton and Bedworth, whose demographic makeups appear to favor Remain, will announce their results.

02:00-03:00 GMT – Result will be coming in again in a flurry from all across the country. West Oxfordshire should announce first, and it could be a bellwether of the Remain effort given its demographics. Cheltenham and Harrogate will declare their results, and Remain is expected to win by a comfortable margin. Underperformance by the Remain campaign here would be worrisome.

02:30 GMT – Results from Dumfries and Galloway should be declared, and they could be Leave’s best chance of a win in Scotland.

03:00 GMT – Enough results should be revealed in order to establish a credible turnout figure.

03:30 GMT – By now, most of the strongest Leave areas will have declared. Meanwhile, results should also be coming in from the largest voting areas—Birmingham, Leeds, Glasgow, Sheffield, Manchester, Bradford, and Liverpool. These areas are mostly favorable for Remain.

04:00 GMT - The vast majority of the results should be in, and it might be possible to forecast the result unless the result is absolutely neck and neck. If that is the case, the result will come down

04:30-06:00 GMT - If the result is still in balance, to the remaining 30 or so areas which should declare results between 5:30am and 7am. They include Fenland, Bristol, Leicester, and Nottingham.

After >06:00 GMT – The final outcome will then be formally declared in Manchester by Electoral Commission Chair Jenny Watson, the Chief Counting Officer for the referendum.

--- Written by Christopher Vecchio, Currency Strategist

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