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Early UK Election Trigger Ratchets Pound Volatility Higher

Early UK Election Trigger Ratchets Pound Volatility Higher

(23 May 2024 – United Kingdom) The pound’s implied volatility jumped sharply after a rain sodden United Kingdom (UK) Prime Minister Rishi Sunak confirmed that an election will be held on 4 July, considerably earlier than anticipated.

The rapid shift higher in implied volatility for GBP occurred from an extremely low base, continuing to remain below their average over the last year. Pound Sterling has outperformed all Group-of-10 (G10) peers except for the greenback in H1 2024. The currency strengthened after a report revealed inflation slowed less than expected in April, threatening to delay interest-rate cuts by the Bank of England (BoE).


“We’re mainly seeing this news play out in the sterling vol structure, with shorter-term volatility receiving a bid on the news. With enough daylight between Labour and the Tories in the polls, it seems as if the election outcome has already been factored in across other markets, hence why spot FX and rates haven’t really been impacted” commented Monex Europe Head of FX analysis, Simon Harvey.

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