According to reports, the pound options trader seems to be preparing for the possibility of the UK postponing to withdraw from the EU.
The sterling risk reversal indicator shows that investors now have a negative view of the pound after 9 months more than the official exit date of March 29. At present, the market has already digested the possibility of the British Parliament vetoing the British Prime Minister Theresa May's Brexit agreement next week, which increases the probability that the British government will seek to extend Article 50 of the Lisbon Treaty.
The measure of position and market sentiment – the difference between the 3 month and 9 month risk reversal options – is currently at its widest level since September last year, indicating that investors are preventing the risk of a weaker pound in the second half of the year.
At the time of this change, Mei is openly considering the "B plan" for Brexit. Earlier, the British Parliament on Wednesday requested that once her withdrawal agreement was rejected, the government must propose a plan B within a few days.
British Labor Party leader Corbin said on Thursday that the opposition party does not rule out the possibility of extending the terms of the Brexit negotiations. Earlier, Labor Party Brexit spokesperson Keir Starmer said he believes it is possible to postpone negotiations until March 29.
Subtle changes in the above market bets can also be seen in the comparison of sterling volatility options. The measure of 3-month volatility did not keep up with the sharp rise in the 9-month volatility indicator this week. A month ago, the differences between the two were much greater. At that time, people were increasingly worried that the United Kingdom would hardly leave the European Union after failing to reach an agreement in March.
(Article source: Global Forex Network)