UK: Sterling's Strength Stands Out - BBH
Research Team at BBH, notes that the sterling's strength is that stands
out and it is difficult to attribute it to Obama's push against Brexit,
but there does appear to have been a change in sentiment.
“Sterling is the best-performing currency not only today but for the past five sessions, rising 1.25% against the US dollar to its best level since mid-February. The next target is $1.4600 and $1.4670, the high from early February. Sterling is rising against the euro for the eighth consecutive session. The next target for the euro is near GBP0.7685, which corresponds to the 38.2% retracement of the euro's rally off the mid-November low near GBP0.7000.
However, investors need to be careful extrapolating too much from the decline in the benchmark three-month volatility and call-put skew. The issue here is the calendar. Three-month optionality goes well beyond the referendum, which has now moved within the two-month window. The pressures have been squeezed into two-month duration. Two-month sterling volatility is at new six-year highs today, reaching more than 14.5% earlier, surpassing three-month volatility which has fallen below 13%.”