Pound outlook most bearish since 2016 as put options on the rise - Bloomberg

Joshua Gibson FXStreet

As reported by Bloomberg, bearish bets on the British Pound Sterling have piled into the short side by the most since June of 2016 as investors brace for a messier Brexit procession than many were hoping for just a few weeks ago.

Key quotes

The premium to buy put options on the currency relative to calls is the steepest since June 2016, with the Sunday Times reporting that seven leading Conservative lawmakers are preparing campaigns to oust her. A confidence vote could come as soon as Tuesday, the newspaper said.

The pound declined more than 1 percent last week after several of May’s ministers quit in disagreement over her Brexit divorce deal with the EU.

“The risk of a no-deal Brexit is greater than the wider market appears to be pricing in,” said John Goldie, a London-based broker at Argentex LLP, referring to the possibility of no-deal. The currency could still drop to parity with the euro by March, he said.

The cost of one-month put options on the pound relative to call options reached 236 basis points, compared with a premium of 68 basis points just a week earlier.

Author

Joshua Gibson

FXStreet

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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