Sterling Volatility Heightened Leading Up to the EU Referendum - Investec
Research Team at Investec, suggests that they have been talking a lot recently about volatility and particularly heightened Sterling volatility leading up to the EU referendum as uncertainty of the outcome, and how the pound will move, grows.
“This morning we saw what that 'volatility' that the currency option market is pricing in can look like. In the early hours of this morning the Pound jumped almost 2 cents against the US Dollar in less than one minute (a move that in normal conditions could take a day at least).
After several polls and bets recently showed the leave vote had gained momentum, a build-up of short term Sterling selling of late combined with illiquid Asian trading times, showed us on a smaller scale what unwinding a one way bet looks like. Whether the move was accidental, or algorithms electronically cutting short positions in micro-seconds, this serves as a timely reminder of how big a hedging risk the EU referendum event could be.”