Analysts at Scotiabank explained that GBP is in an environment of broad-based USD weakness.
“Fundamental releases have been limited, and nothing major is scheduled ahead of next Thursday’s GDP (second release).”
“Short positioning in GBP appears to have moderated over the past few weeks, however we continue to highlight the currency’s vulnerability to a squeeze.”
“Measures of implied GBP volatility are climbing broadly across a range of time horizons, and risk reversals suggest a continued shift in the balance of risk.”
“Note that the one week risk reversal is now pricing slight premium for protection against GBP strength as longer horizons suggest a continued erosion in the premium for protection against GBP weakness.”