13 June 2016 at 7:42 GMT
- Brexit momentum presently with 'Leave' campaign2
- Cable volatility trading at substantial premium versus norm
- There now exists negative risk transfer from Brexit into equities
- Expect a 25 bps rate cut if 'Leave' wins on June 23
- GBPUSD 'going to 1.2000 with or without Brexit
- GBP yield has made an all-time low
The fortunes of the UK's 'Brexiteers' are on the rise while those of sterling
traders – longs, at least – are fading quickly. Photo: iStock
By Steen Jakobsen
Apprehension surrounding the Brexit vote on June 23 is now spilling over into risk overall. The trend is clear in the polls...
There is presently zero liquidity in the GBPUSD option market; GBPUSD one-month risk reversal is at minus 800 basis points!
This is major warning signal for risk; the norm, as can be seen, is plus minus one.
Create your own charts with SaxoTraderGO click here to learn more
All tenors (expiries) into the June 23 Brexit vote are well bid:
- two-week 36/41
- one-month minus 12 months = fair value = is trading at more than twice the norm
Looking at spot levels:
GBPUSD support comes in at 1.4068, which is a major sell level.
Furthermore, the Brexit risks are now spilling into equities. Here is the one-month risk reversal in GBPUSD versus DAX futures in June:
GBP long-term yields have hit an all-time low:
— Edited by Michael McKenna
Steen Jakobsen is chief economist and CIO at Saxo Bank