The pound lurched lower on Monday and implied volatility for the UK currency into year-end ratcheted to 3-month highs after reports Britain was about to renege on parts of the Brexit withdrawal agreement, sharply reducing the chances of a post-Brexit deal by October's deadline. With speculators net long of the pound versus the dollar, the twin event risks of the Brexit deadline and U.S. election within days of each other may make for an extremely volatile period. More broadly, UK assets are already nursing a substantial risk premium surrounding the potential double whammy of the pandemic and evaporation of the country's biggest international trade deal - with both the UK's blue-chip FTSE100 and midcap FTSE250 equity indices underperforming European and U.S. benchmarks by between 10% and 20% so far this year.
Chart by Ritvik Carvalho and commentary by Mike Dolan.
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