A risky week ahead for Sterling traders - Scotiabank

Analysts at Scotiabank explained that headline risk is elevated with Brexit negotiations set to begin Monday, just ahead of BoE Gov. Carney’s re-scheduled Mansion House speech on Tuesday. 

Key Quotes:

"A reminder that the most recent BoE policy decision showed an unexpected rise in MPC members looking to raise the Bank Rate by 25bpts. We remain biased to an extended hold. In terms of CFTC sentiment, we note a third consecutive week of widening bearish positioning."

"Measures of implied volatility are low, and risk reversals are showing a notable divergence in the premium for protection against GBP weakness. Risk reversals to three months are suggestive of a moderating premium while longer measures are implying greater demand."

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