Markets already pricing in Remain result in EU referendum

There will be a limited gain for sterling if there is a Remain result in Britain's referendum on continued membership of the European Union (EU),analysts said.

A result is expected by 7 a.m. local time (0600 GMT) on Friday, but markets on Thursday were already pricing in a Remain verdict.

Sterling strengthened against the U.S. dollar, hitting around 1. 48 during the day. This is a rise from the 1.40 point hit on June 16, and is now not far off the 1.54 rate in May last year when the decision to have a referendum was announced.

Foreign exchange markets have been tracking bookmakers odds throughout the EU referendum campaign, and there is a strong correlation between strong sterling and poll leads for Remain.

Alex Holmes, an economist with London-based economic analysts Capital Economics, said in a note that in the event of a Remain vote the "near-term upside for the exchange rate... is probably small" because a Remain victory was already priced in.

Polling stations for the election will close at 10 p.m. local time. In other British elections, exit polls and comparisons with previous elections can give a good indication of the result, however the EU referendum is unprecedented in recent time and there are no comparisons, and financial markets will have to wait longer before they can make their moves on the result. In addition, no media or polling organizations have carried out exit polls of voters.

Sam Tombs, an economist with London-based economic analysts Pantheon Macroeconomics, said in a note that "sterling and other asset prices will move sharply when the likely result of the U.K.' s EU referendum is discernible, but exactly when that point will come during the night is uncertain".

Despite the closing of the polls at 10 p.m., no early indication of a result is expected. Votes will be counted, which will reveal the turnout. This figure will be available by about 2 a.m.. The totals of Remain or Leave votes will then be counted.

Areas which are likely to finish their counting earlier than others are expected to be areas of a Remain majority, so a clear sign of the result is unlikely to be available until between 5 a.m. and 7 a.m..

Bookmakers are backing a Remain win, with an 86 percent probability according to betting on Thursday afternoon. In the event of a Leave win, sterling is likely to make a substantial initial fall, and there would be significant volatility in other markets.