Sterling traders and British gamblers share no-deal Brexit view
Reuters
Published Aug 14, 2019 11:42AM ET
Sterling traders and British gamblers share no-deal Brexit view
By Ritvik Carvalho and Tommy Wilkes
LONDON (Reuters) - Foreign exchange markets and British gamblers share an increasingly similar view on the prospect for a no-deal Brexit, with the relationship between the two notably close since Boris Johnson became prime minister.
The pound has tumbled 4% to nearly 93 pence per euro (EURGBP=D3) from 89 pence in late July when Johnson came into office and investors scrambled to price in his pledge to take Britain out of the European Union at the end of October with or without a withdrawal deal.
Economists generally view a no-deal Brexit as an outcome that will hit the British economy hard, and sterling traders expect the pound to plunge even further should such an outcome materialize.
The implied probability of a no-deal Brexit by end-2019 based on odds quoted by bookies Betfair has risen in tandem: to 40% today from under 30% in July.
(GRAPHIC - Betting odds mirror sterling weakness in no-deal Brexit bets: https://tmsnrt.rs/2N97Zea)
"We observed a similar phenomenon in the run-up to other binary event risks in the UK – expectations for both the Scottish independence referendum and the 2016 EU referendum completely dominated GBP direction in the final weeks," Adam Cole, chief currency strategist at RBC Capital Markets, wrote in a note to clients.
Betting on political events in Britain is popular. Some analysts say it can prove better at forecasting than traditional polling data and financial market moves after many investors were wrongfooted by the Brexit vote in 2016.
Cole said betting odds were helpful proxies but there were limits to their usefulness - ahead of the 2016 referendum there was anecdotal evidence "that the implied probability of a vote to leave was being manipulated and arbitraged against GBP".
Get The News You Want
Written By: Reuters
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.