27 Apr 2015
GBP ignoring election risks – MP
FXStreet (Barcelona) - Dean Popplewell, Director of Currency Analysis at MarketPulse, argues that the GBP market doesn’t seem to be pricing in the election related uncertainty, and the event risk is such that the situation might change very quickly.
Key Quotes
“Of late, sterling has been quietly bid, dumfounding the bears and confusing the markets. The Greek fiasco has obviously lent support to the pound (£1.5126), certainly more than the market had been expecting. The U.K election is less than two weeks away and continues to be widely seen as unpredictable. Nevertheless, the forex market seems currently unfazed about the political outcome.”
“The event risk is that the situation could change very quickly, just like last Septembers Scottish referendum. The vote was nearly upon us before the markets woke up to the potential risks.”
“Looking at two week forward vols, they are trading at +10.1%, which suggests that the market does not expect election related uncertainty to persist. The danger is that the market does not seem to be pricing in a hung parliament or even the probability of a second general election. Investors should be wary that it’s too quiet on the sterling front.”
Key Quotes
“Of late, sterling has been quietly bid, dumfounding the bears and confusing the markets. The Greek fiasco has obviously lent support to the pound (£1.5126), certainly more than the market had been expecting. The U.K election is less than two weeks away and continues to be widely seen as unpredictable. Nevertheless, the forex market seems currently unfazed about the political outcome.”
“The event risk is that the situation could change very quickly, just like last Septembers Scottish referendum. The vote was nearly upon us before the markets woke up to the potential risks.”
“Looking at two week forward vols, they are trading at +10.1%, which suggests that the market does not expect election related uncertainty to persist. The danger is that the market does not seem to be pricing in a hung parliament or even the probability of a second general election. Investors should be wary that it’s too quiet on the sterling front.”