GBP/USD risk reversals: Bearish bias strongest in 6.5-week
|- The demand for the GBP puts is on the rise.
- The investors could be hedging against further downside in the GBP/USD.
The GBP/USD fell to 1.4067 yesterday - its lowest level since April 6. The drop from 1.4377 (weekly high) to 1.4067 indicates the tide has turned in the favor of the GBP bears.
The options market is also bearish on the GBP. The one-month 25 delta risk reversals are being paid at 0.5 GBP puts vs the recent high of 0.2 GBP puts. The rise in the implied volatility premium for the GBP puts indicates increased demand for the bearish bets (put options) - investors expect further GBP to slide further.
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