EU referendum: Markets cast their votes early as sterling and FTSE 100 rally as polls open

Jake Cordell
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Traders are putting their money where they think the country's mouth is
Traders are putting their money where they think the country's mouth is (Source: Getty)

We may not know what the result of the referendum will be until the small hours, but the markets seem to understand which way the country is heading already.

After polls last night showed a swing to Remain in the final days of campaigning, the pound rallied against the dollar, hitting its highest level of 2016 at $1.4842 around midnight. It has since eased back to $1.4763, though is still up 0.4 per cent on the day, and has been appreciating at breakneck pace since last Tuesday.

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The FTSE 100 was slightly less nervy, jumping 0.7 per cent at the open to pass 6,300 to get off to what could be the fifth consecutive day of gains on the index. Tesco led the climbers, up two per cent after posting better-than-expected sales figures.

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As polls opened this morning, betting markets showed the chances of Remain had shortened again, with Britain voting to stay in now a best price of 2/9 - down from a high of 4/7 back when the Leave campaign peaked around 10 days ago.

"At the moment there is a close correlation between betting odds and financial markets," pointed out Jasper Lawler of CMC Markets.

Oil prices rose slightly, with Brent Crude up 0.7 per cent and above $50 a barrel, in a sign that risky assets were back in favour with investors around the world.

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Yields on government debt have also climbed with the vote approaching - another sign that investors are a little less nervy than a few weeks ago. 10-year UK bonds now pay 1.32 per cent - up from 1.14 per cent this time last week.

However, big movements could unfold due to shallow money in the market, analysts warned.

While polls are open, Hussein Sayed, chief market strategist at FXTM said: "Liquidity [is] most likely to [be] dry and big swings to be realized in all asset classes, but the real action [will] start after midnight on Thursday when individual regions start to declare their vote counts, ahead of the final results early on Friday morning."