Global Markets Slide as AI, Crypto, and Precious Metals Face Heightened Volatility 
Silver Prices Plunge in Asian Trade as Dollar Strength Triggers Fresh Precious Metals Sell-Off 
Fed Governor Lisa Cook Warns Inflation Risks Remain as Rates Stay Steady 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
U.S.-India Trade Framework Signals Major Shift in Tariffs, Energy, and Supply Chains 
Fed May Resume Rate Hikes: BofA Analysts Outline Key Scenarios 
Vietnam’s Trade Surplus With US Jumps as Exports Surge and China Imports Hit Record 
Japan Economy Poised for Q4 2025 Growth as Investment and Consumption Hold Firm 
Dow Hits 50,000 as U.S. Stocks Stage Strong Rebound Amid AI Volatility 
US Gas Market Poised for Supercycle: Bernstein Analysts 
The Corona crisis has hit the British economy comparatively hard. In addition, Brexit risks remain high, which is why we assume that the pound will continue to remain weak against the euro.
Given that the UK and EU should have a strong interest in the conclusion of a free trade agreement, not least due to the already difficult economic situation caused by the corona crisis, our economists are confident that an agreement on at least a partial trade deal which covers the most important areas remains possible in the next couple of months. Nevertheless, they acknowledge that the probability of a no-deal Brexit has increased significantly. For this reason, we are forecasting a weak pound in the short term and only a very moderate recovery later in the year. In fact, there is a high risk that the pound will suffer much more severe setbacks in the meantime than our forecasts suggest due to rising Brexit risks. Exchange rate volatility is likely to increase particularly towards the end of the year when the UK is due to actually leave the EU single market.
As a result, our defensive stance in EURGBP has been dictated by the receding global economic tide, but we cannot ignore that geopolitical and economic risk has been an instrumental factor in these worse macro outturns. This warrants a tactical reduction in our defensive exposure but we uphold our hedging portfolios via 3-way straddles.
Let’s just quickly glance at OTC updates & suitable options strategy:
The positively skewed IVs of 3m tenors are indicating upside risks, more bids are observed for OTM call strikes up to 0.9250 levels.
While mild bearish hedging setup is observed for the existing EURGBP bullish risk reversal setup across all tenors substantiates upside risks.
Accordingly, at spot reference: 0.9046 levels, we upheld our shorts in GBP on hedging grounds via 3-month (0.89/0.9250) debit call spread. If the scenario outlined above unfolds, we will re-assess our stance but at the moment there are no changes to our GBP recommendations.
