GBP/USD: Participants Being Opportunistic in Adjusting Exposure - BBH
Analysts from Brown Brother Harriman see market participants being
opportunistic in adjusting sterling exposures and affirm that data
suggests that in the options market puts are being bought.
“Sterling has been in a clearly identifiable range since the beginning of March between $1.40 and $1.45. Three month implied volatility remains elevated near 16%, which is the highest since 2010.”
“That suggests the demand to buy options rather than sell. The puts are going for a near-record premium over calls, suggesting that the options being bought are puts. Implied volatility has softened a little today, and the premium for puts has eased slightly today. We would not read much into this price action.”
“We see market participants being opportunistic in adjusting sterling exposures. The first wave of position adjustment seems over as the event moved within the three-month time horizon, a sweet spot for many investors. Sellers of sterling seemed to have stepped back, perhaps discouraged when sterling approached $1.40. However, sellers reemerged earlier this week when sterling recovered to $1.4360. Again today, sellers retreated when sterling dipped below $1.41.”