FX Signals | Pound Traders Look Beyond Brexit

(Bloomberg) — Pound traders who have grown used to Brexit brinkmanship between London and Brussels are making two assumptions: there’ll probably be a trade deal, and U.S. elections matter more right now.

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It’s spurring demand for pound-bullish option bets and putting a kink in the currency’s volatility curve, which peaks at the one-month tenor. That’s well beyond the U.K.’s self-imposed.

Brexit Flare-Up

Britain and the EU have been at a similar impasse in the past, only to reach some sort of compromise at the very last minute.

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Worst Levels in a Month for Pound to Canadian Dollar EX

FX Signals | Pound Traders Look Beyond Brexit

A man cleans a board with different currency signs at a currency exchange office in Madrid, Spain, June 24, 2016. REUTERS/Susana Vera

In sign of the market’s positioning, sterling held its ground when the U.K. government warned Wednesday it would pull out of trade talks with the EU if there is no clear deal in sight next week.

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Out of a notional 19.8 billion pounds ($25.6 billion) that traded through the Depository Trust & Clearing Corporation this month, 63% were pound calls, up from 44% in September. The CME Group (NASDAQ:CME) announced Wednesday that it executed the largest single options trade ever, a three-month pound call with strike at $1.40.

Pound to US Dollar Exchange Struggle

FX Signals | Pound Traders Look Beyond Brexit

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