GBPUSD: Brexit Latest Pushes Overnight Implied Volatility to Extremes
By Richard Dvorak
GBPUSD overnight implied volatility has jumped to its highest level since November 15 as forex option traders price in the latest Brexit uncertainty. Increasing implied volatility reflects higher ‘insurance’ costs for GBPUSD currency traders who utilize options to hedge their positions and reflects the market’s view that spot prices could experience significant swings over the contract’s respective duration.
Prime Minister Theresa May still faces an uphill battle to get her Brexit deal passed through the House of Commons as British MPs remain opposed to supporting the Withdrawal Agreement negotiated with the EU. Parliament has previously rejected the Brexit deal twice and has led the UK government to request an extension to Article 50 in a last-minute attempt to save Brexit.
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