Single European Currency Tracker, January 2002

Our latest MORI poll shows a sharp rise in public support for EMU entry. The balance of opinion against EMU is back to January 1999 levels and is close to the mid-98 highs.

The pro-EMU swing is bigger than we had expected. Moreover, the government's popularity remains very high, despite its increasingly pro-EMU stance. This will encourage the government to continue to make the pro-EMU case, hoping to shift public opinion further.

Previously, we have argued that the chance of EMU entry in 2003-05 is about one in three (33%). The scale of the pro-EMU swing suggests that chances of EMU entry in 2003-05 are more like 40%-45% -- not quite the base case, but close. EMU speculation is likely to rise, and this is bearish for long gilts and sterling. The intermediate part of the curve would gain from EMU speculation, but the very front end probably is still vulnerable to faster growth (and risks of a weaker pound).

Technical details

Latest polling conducted between 17-22 January 2002. Sample size 2,117 people for latest survey, and similar for earlier results.

Sources: MORI Financial Services and Schroder Salomon Smith Barney

UK -- Balance of Opinion Over EMU Entry, 1991-January 2002