3 May 2016
UK: Sterling remains firm - BBH
Research Team at BBH, notes that the UK Sterling remains firm and this has been the recent pattern.
Key Quotes
“There are at least two explanations offered. First is that there has been some relaxation of fears of Brexit. We are not convinced of this as many polls continue to show results near the margin of errors, suggesting a close decision.
In addition, two-month volatility remains elevated at almost 14.4%. A five-year high was set in late-April near 14.5%. Also, the skew in options pricing (25-delta risk-reversals) remains near its extreme. At the most in late April, puts were at a 3.95% premium to calls. Today, indicative prices suggest a 3.81% premium.”
Key Quotes
“There are at least two explanations offered. First is that there has been some relaxation of fears of Brexit. We are not convinced of this as many polls continue to show results near the margin of errors, suggesting a close decision.
In addition, two-month volatility remains elevated at almost 14.4%. A five-year high was set in late-April near 14.5%. Also, the skew in options pricing (25-delta risk-reversals) remains near its extreme. At the most in late April, puts were at a 3.95% premium to calls. Today, indicative prices suggest a 3.81% premium.”