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The pound was trading below the $ 1.24 mark on Wednesday morning, due to the strong dollar and growing investor concern over the increasing likelihood of a Brexit without a transaction.
The British pound was down 0.2% against the dollar, at $ 1.2385, stammering near its lowest level in 25 months, while it dropped the same amount in relation to the dollar. euro.
The currency is down nearly 1.5% this week as investors reacted to the growing risk that Boris Johnson's strategy towards Brexit will lead Britain to a no-go exit. 39, EU in the coming months.
Many monetary investors have preferred to remain on the sidelines because of the fog of political uncertainty. However, this week's important move began after Johnson announced that Irish security should be totally abolished in any new Brexit agreement, which the EU rejected. An EU diplomat said that the favorite who would replace Theresa May at Downing Street seemed to live in a "fantastic" world.
Esther Reichelt, currency strategist at Commerzbank, said some investors had realized that the next British prime minister would have trouble finding an easy solution to the stalemate over the Brexit "only yesterday".
"Yesterday's movements once again showed that the foreign exchange market was still struggling to accurately reflect Brexit news," she said.
The evolution of the options market, however, has shown that investors are beginning to seek greater protection against a sharp rise in the pound sterling around the Brexit deadline of 31 October.
Implied volatility, which measures expected currency fluctuations over the next three months on the basis of options trading, has increased in recent days, although it remains low compared to the end of last year period. when Mrs. May had tried in vain to force her Brexit. deal with parliament.
Ms Reichelt said the relatively low price of the hedge offered an "attractive opportunity" as the pound could break significantly in one way or another depending on the policy.
"The perceived probability of a Brexit after the October 31 deadline is seen as reflected in the options market, as the implied volatility curve for the pound sterling is strongly distorted around the cut-off date," badysts said. currency at ING.
Many investors and badysts come to the conclusion that a general election and a subsequent delay to Brexit are an important possibility.
Seema Shah, chief strategist at Global Global Investors, badet manager, said, "Of course, many steps and permutations are possible before the end of October. A general election is the main obstacle, while the last three years have shown us the can on the road always seems the easiest way to go. "
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