Throughout the course of Brexit negotiations there has been a severe and frequent mispricing of risk in the UK Pound. The nature of negotiation and politics brings the obstacle of a series of high-risk events not least overnight summits, negotiation phases and general elections as we have seen on several occasions since 23 June 2016. We are either living in another period of market complacency or Sterling traders know something that the public and likely government doesn’t.
At shy of 10% implied volatility in cable (GBPUSD) over 6 months, the options market is pricing an alarmingly low level of expected price volatility in the UK currency. This could be attributed to one of a few things: 1) the salience of a Brexit deal to the UK economy has suddenly vanished. 2) as both economies reel, will former Union members of 47 years be more lenient meaning a deal is all but in the bag? 3) is this just a case of market complacency and yet another mispricing?
Whatever the reason, if there are further deteriorations or significant progress in Brexit negotiations then current market pricing is likely to exacerbate spot price volatility providing ample opportunity for strategic FX market participants. One of the best ways to take advantage of mispriced volatility is with a strategy of limit orders and stop loss protections. We would be glad to discuss and implement such a strategy with you.
From tech stock surges to emerging market currency underperformance, bond market mania to carbon credits, almost every corner of financial markets have felt the pandemic in some way. Two commodities in particular show the changing habits of our post lockdown lives. As we swap the pub and planes for our own homes, the price of nuts has plummeted whilst the cost of wood has skyrocketed.
Believe it or not lumber is a traded contract on the Chicago Mercantile Exchange. During the turbulence of the first outbreak of the pandemic itself the contract traded below $300 per thousand board feet for the first time in half a decade. Today the contract stands at an all time high in excess of $800. The meteoric rise was the result of low inventories and demand for the raw material prompted by the rise of the DIY project. Shed refurbishments and home extension projects have pushed the futures contract to its present highs.
Exacerbating the wealth inequality between squirrels and beavers, the price of nuts has simultaneously plummeted. I have seldom if ever dived into the nut bowl on the bar top but pubs as well as airlines and hotels are some of the largest market participants in the nut market. Shelled almonds have fallen from $6,500 in the US ahead of the pandemic outbreak to below $4,000 today. Thinking of cashewing in? You’ll find that market down some 10% on the year. The United States is a leading exporter of nuts but maybe don’t start taking trading signals on the Dollar from peanuts just yet.
Discussion and Analysis by Charles Porter
Click Here to Subscribe to the SGM-FX Newsletter
Related Insights
Daily Brief – Chancellor Reeves
Humphrey Percy
Wed 5 Nov 2025
Chancellor Reeves Market observers were no better informed at the end of the Rachel Reeves speech than they were at the outset yesterday morning. The only surprise was that having comprehensively floated options in the past two months for inclusion in her November 26 Autumn Statement, that the Chancellor should have elected to speak at […]
Daily Brief – Eurozone Growth
Humphrey Percy
Wed 17 Dec 2025
Eurozone Growth Those productive Germans have for the second month been less productive it turns out in December which was a surprise to the pointy heads deputed to monitor EU stats. The story is as follows: the German services sector remains relatively resilient but manufacturing output has declined. At present the French economy is doing the […]
Daily Brief – European Job Vacancies
Humphrey Percy
Mon 22 Dec 2025
European Job Vacancies Here’s a chart which made us sit up and reflect on how things differ across the larger European economies. Looking at job vacancies in 2020 at the time of the pandemic versus today, France and Germany have approximately 15% more jobs on offer whereas Spain has 53% more and Italy a stonking […]
