The British pound today is the strongest currency in the morning among the world's major currencies quoted against the US dollar. In fact, today during the Asian session volatility was muted, and fluctuations did not exceed 0.15 percent, in addition to the pound, which gained as much as 0.7 percent to USD.
As a result of further information on Brexit, the GBP/USD exchange rate approached the round level of 1.2700. Let us remind you that by the end of October Great Britain should leave the European Union and divorce conditions have not yet been determined. Just as it was before the previous Brexit postponement, now everything is prepared at the last minute. Of course, the change of power in the Great Britain in the meantime may mean that this time Brexit will come with or without agreement.
The optimism that appeared on the British pound in the morning resulted from information from EU’s chief Brexit negotiator Michel Barnier. According to his statements, a deal is possible this week, but talks are difficult. RTE reporter Tony Connelly, in turn, writes that the UK is to present new Brexit proposals this morning. They are to be presented at the meeting with the negotiators of the European Commission in Brussels.
It seems that the Brexit solution is closer than ever before, which also translates into the currency options market. Investors, without thinking for a long time, started buying options and thus increased the expected volatility. For weekly options, implied volatility increased for the fourth day in a row to 18.1 percent, the highest level since March 29. Looking at the distribution of put and call options, investors are leaning more towards call options, as the GBP/USD increases. Thus, this direction is estimated by option investors two weeks before Brexit.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal Opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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