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EUR/GBP Calls in Demand Despite UK Inflation Beat

GBP
  • No surprise to see GBP futures volumes well ahead of average for this time of day, given the upside surprise to UK CPI earlier today. U3 GBP futures have traded near 60k contracts, over double what you'd see at this point in a routine session - activity mirrored EUR/GBP options activity, which is also busier than normal.
  • EUR/GBP upside protection has been in demand, typified by solid trade in 0.8575 and 0.8880 call strikes across the morning. This is mirrored in commentary from Citi, who write that markets have been "overlooking carry trades in favour of a shift to growth/recession concerns" in the UK.
  • GBP/USD's post CPI reversal has put the pair lower for three consecutive sessions, with 1.2630 the next meaningful support (Jun15 low). Any move through here exposes 1.2511, the 50-dma.
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com

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