September 26, 2022 01:51 GMT
GBP/USD has stabilized somewhat after hitting a fresh record low of 1.0350. The pair was last around 1.0550, which is still close to 3% below NY closing levels. It continues to dominate sentiment across the G10 space.
- Focus is now likely to rest with a potential parity test against the USD. Some option flows have already shown this as a market focus point, with a GBP put, at a 0.99 strike (expiry March next year), going through on Friday (DTCC via Bloomberg).
- There has been a 1.00 put (expiry in 1 month) going through this morning as well, but for a much smaller notional, compared to the flow on Friday.
- 1 week implied vol continues to climb, last at 23.13%. Intra-day highs in early 2020 were just above 35% for the 1 week, so we are still below these levels. 1 month implied was last at 18.71%.
- With the UK government generally pushing break on the market reaction following Friday's tax cut/fiscal announcement (indeed hinting more tax cuts are coming), the early London focus is likely to be any shift in the government's stance. The BoE's reaction will be the other focus point.