Options market favouring more downside for the pound ahead of Brexit deadline

Author: Justin Low | Category: Forex Orders

GBP/USD 3-month risk reversals fall as volatility increases

GBP/USD 3-month risk reversals 29-07
Option traders are siding with spot traders on the direction for the pound in July and the 3-month risk reversals in GBP/USD indicate that option traders see more pain for the pound still to come ahead of the 31 October Brexit deadline.

The 3-month risk reversals have fallen sharply this month and are falling further in the new week as Boris Johnson's government continues to talk up a no-deal Brexit outcome.

GBP/USD 3-month implied vol 29-07
This comes as 3-month implied volatility in the pound also rises to its highest level since early April this year. This just further adds to the positioning notion in the pound highlighted earlier today here and is something to be aware of as market participants continue to their backs on the pound as the currency hits fresh 28-month lows against the dollar.

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