Sterling Options Signal More Turmoil as May Speech, Ruling Loom

A measure of anticipated swings for the pound climbed to the highest in three months before U.K. Prime Minister Theresa May’s speech on Brexit plans Tuesday and a court ruling this month on whether the British leader or Parliament carries the power to invoke the exit.
The pound slid below $1.20 for the first time since October’s flash crash after the Sunday Times reported May will prepare to withdraw from tariff-free trade with the European Union in return for freedom to curb immigration and strike commercial deals with other countries. While hedge funds started to boost bets against sterling from the end of last year, Bank of Tokyo-Mitsubishi UFJ Ltd. said the Supreme Court ruling may spur investors to unwind these short positions.
‘Even if the pound recovers somewhat in London, it seems as though the realities of a hard Brexit are still not fully priced in,’ said Sean Callow, senior strategist at Westpac Banking Corp. in Sydney. ‘It is difficult to make the case for the pound to avoid testing, probably breaking, the ‘flash crash’ lows in coming weeks.’
The pound fell as much as 1.6 percent on Monday to $1.1986, the weakest level since Oct. 7 when it slid to $1.1841, the least since 1985. Sterling was 1 percent down at $1.2065 as of 11:14 a.m. in London.

This post was published at bloomberg