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Options Pricing a Sizeable Swing in GBP Monday

GBP

No surprise to see GBP implied vols surging further this morning, with the sharpest rise seen in the short-end. One week vols, naturally capturing the Sunday night deal deadline have risen north of 20 points, to the highest level since March's COVID crisis (although this pales in comparison to rates north of 50 points as the 2016 referendum results rolled in...).

  • For options pricing for a Monday expiry after the deal deadline has passed, GBP/USD implied breakevens sit at just over 210 pips (sizeable, relative to a 60 pip breakeven for the same contract in EURUSD).
  • Markets see a 24% implied probability of GBP/USD trading below 1.30 by the Monday close and a 19% probability of trading above 1.35.

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