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Sterling brushes aside sturdy jobs data; volatility drops

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News Today 2

Pound

Sterling implied volatility gauges slipped across the board, extending a recent decline, to their lowest levels since January 2018, as no significant Brexit-related developments were expected this week.

Outside the drop in implied volatility measures in the currency derivatives markets, wider moves in the pound were limited with the British currency broadly steady despite robust jobs data.

Total earnings, including bonuses, rose by an annual 3.5 per cent in the three months to February, the Office for National Statistics said, matching the median forecast in a Reuters’ poll of economists.

It was the joint highest rate since mid-2008.

“The encouraging data may fuel some confidence in sterling.

“However, any significant movements will likely be muted as politics remains the key focus as we approach the Easter break,’’ said Sam Cooper, a Vice President at Silicon Valley Bank.

The pound was broadly steady at $1.3089 against the dollar and flat against the euro at 86.36 pence.

Volatility in the pound has collapsed after EU and British lawmakers removed the risk of a no-deal Brexit last week, prompting traders, who had hedged their sterling positions, to unwind those bets.

But with the possibility of months of uncertainty in Britain as politicians struggle over how – or whether – to leave the EU, investors are broadly staying away from the pound.

Valentijn van Nieuwenhuijzen, CIO at NN Investment Partners, which manages 246 billion euros or $278.13 billion in assets, said he is steering clear on bets on the pound and only taking positions to hedge overall portfolio risks due to the political uncertainty.

Investor surveys also highlighted that uncertainty.

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