Talking Points:
• Short-term implied volatility for GBPUSD is at its highest level in 5 years ahead of the election
• This election looks as if it may be one of the most convoluted in decades
• A disinterested capital market and clouded view may make the play on volatility for Pound the best option
Want to develop a more in-depth knowledge on the market and strategies? Check out the DailyFX Trading Guides we have produced on a range of topics.
Compared to the UK employment data or even the BoE Quarterly Inflation report, the UK election carries a vague fundamental threat for the Pound. Rather than a black-or-white outcome whereby the speculative masses can agree to a 'bullish' or 'bearish' scenario to the vote, there is a disconnect from results to market reaction. Furthermore, the opinion polls heading into the ballot suggest this will end with wrangling for a coalition. This already convoluted event may thereby take days to be fully processed. How can we incorprate event risk that isn't expected to offer a clear impact and seems to be priced out as a low-risk threat in equities and bonds? Implied volatility itself may prove the tradable element. We discuss the UK election and its potential impact on the Pound in today's Strategy Video.
Sign up for John’s email distribution list, here.
