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Markets Notch Higher Year-End Implied Probabilities for a GBPUSD Rally

GBPUSD
  • With GBP testing new multi-month highs against EUR, USD and others in recent trade, markets are notching higher their year-end options-implied pricing for GBP/USD.
  • Markets now assign a 34.8% probability of GBP/USD trading above 1.30 on Dec31 this year vs. 22.9% just one week ago.
  • Similar mark higher for other levels: Above 1.27 now 52.3% (Prev. 38.8%) and above 1.25 now 63.5% (Prev. 51.0%) as spot prices creep higher.
  • GBP/USD boosted by continued divergence in Fed and BoE implied pricing; BoE implied path looks for 5x25bps hikes before the bank rate peak is in - an extra 25bps step relative to pricing this time last week. Meanwhile FOMC-dated OIS shows just 2bps of tightening priced for today and a cumulative ~17bps through July.

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