Pound Volatility Climbs as Tory Leadership Race Comes Into Focus


© Bloomberg. British 10 and five pound banknotes in London, U.K. Photographer: Chris J. Ratcliffe/Bloomberg

(Bloomberg) — Traders are starting to bet on swings in the pound next month as the race to replace U.K. Prime Minister Theresa May kicks off.

The Conservative Party leadership contest has caught the attention of options traders as May’s successor is likely to define the course of Brexit. With May expected to agree a timetable for her own departure in June after a final attempt to get her Brexit bill through Parliament, buying protection against currency swings is getting more expensive.

“It likely reflects more political uncertainty in the U.K.,” said Lee Hardman, a currency strategist at MUFG Bank Ltd. “If the withdrawal agreement fails to pass again, as appears likely, then it is likely to fire the gun on the process to change the Conservative leadership.”

The pound was the most volatile currency among peers for most of this year, before bets on short-term swings collapsed last month after the European Union pushed back the Brexit deadline until October. Volatility is now picking up again, with a gauge of one-month implied swings leading gains to a two-week high of 7.73%.

The is treading water below $1.28 after sliding more than 2% last week, the most since October 2017, as the possibility that May’s successor could push for a harder split from the EU weighs on sentiment. Traders will next be watching the outcome of Thursday’s European parliamentary elections, to see the strength of Nigel Farage’s Brexit Party.

Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

Comments

comments