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Currency Volatility: GBPUSD Price Swings Driven by Looming Brexit Vote

Currency Volatility: GBPUSD Price Swings Driven by Looming Brexit Vote

Rich Dvorak, Analyst

GBPUSD IMPLIED VOLATILITY – TALKING POINTS

  • GBPUSD overnight implied volatility leaps to highest level since June 2017
  • Derived trading ranges suggests that GBPUSD could climb as high as 1.3287 or fall as low as 1.2975 with the Sterling’s next direction highly dependent on the meaningful vote’s outcome expected around 19:00 GMT
  • Find out the Top 10 Most Volatile Currency Pairs and how to trade them

GBPUSD overnight implied volatility continues to climb as the latest Brexit news roils currency markets. The indirect variable that is useful in estimating the magnitude of potential price swings eclipsed 22 percent today – its highest level since June 2017.

FOREX MARKET IMPLIED VOLATILITIES AND TRADING RANGES

Forex Implied Volatility on USD, EUR, GBP, JPY, CAD, AUD, NZD and CHF currency pairsCurrency Market Implied Volatility on GBPUSD before Brexit deal vote March 12, 2019

The Pound Sterling whipsawed in response to conflicting news released by Brexit reporters on last-minute concessions made by European Council’s Donald Tusk in hopes of helping Prime Minister Theresa May push her withdrawal agreement across the finish line.

While the update initially sent spot GBPUSD soaring on the prospect of a timely soft-Brexit, gains quickly reversed when headlines crossed the wires that British Attorney General Geoffrey Cox’s legal opinion went effectively unchanged.

GBPUSD CURRENCY PRICE CHART: 30-MINUTE TIME FRAME (MARCH 11, 2019 TO MARCH 12, 2019)

GBPUSD price chart shows currency volatility before Brexit vote March 12, 2019

Trading ranges derived from overnight implied volatility suggests that GBPUSD could climb as high as 1.3287 or fall as low as 1.2975. The cable’s direction from here is highly dependent on the upcoming meaningful vote slated for 19:00 GMT. GBP bulls will likely cheer if the PM’s deal garners enough support while defeat could create additional uncertainty over the Brexit Timeline and send the currency swooning lower.

- Written by Rich Dvorak, Junior Analyst for DailyFX

- Follow @RichDvorakFX on Twitter

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

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