### POV: BREXIT WITHDRAWAL TERMS NO........>

STERLING: ### POV: BREXIT WITHDRAWAL TERMS NO REPRIEVE FOR THERESA MAY

-The lack of upside in GBP crosses on the back of the EU-UK preliminary

agreement this weekend should trouble No10 policymakers and is a further sign

that markets see little chance of Brexit proposals gaining smooth passage

through the Commons.

-Despite GBP/USD recovering from the year's $1.2662 lows, butterfly contracts

continue to surge, showing the market is pricing in greater chances of large

gyrations in GBP over several different maturities. Within the past few

sessions, GBP/USD 3m 10-delta butterfly contracts (among others) hit the highest

levels since the referendum itself, another indication of the market's

scepticism of an orderly transition period. See ( https://tinyurl.com/GBPUSDBF )

-GBP/USD puts and EUR/GBP calls remain better-bought as hedging costs ease from

recent highs, but options buyers won't be counting their blessings as implied

vols hold well above recent averages. As the parliamentary maths continues to

defy government requirements, implied GBP vol markets will remain bid, with

sensitivity surrounding the vote taking place on or around Dec12.