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SocGen Recommend EUR/GBP Topside Via Options as GBP Looks Vulnerable

EURGBP
  • SocGen write GBP now looks vulnerable as lower inflation, political uncertainty and pressure for tighter fiscal policy and are now setting the stage for currency weakness. They note that GBP vols have been falling less than their G10 peers, suggesting further downside risk. In addition, EUR/GBP risk reversals suggest selling topside risk to position for gradual upside in the FX rate.
  • For specific trades, they recommend buying 3m EUR/GBP 0.8680/0.8800 1x1.5 call spread, buying EUR/GBP 3m one-touch with a knock-in at 0.8950.

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