British Pound Futures Volatility Forecast (03/04/2011)

The market rallied to 161 unexpectedly after an unstable trading week which saw Pound futures trading within 160 and 160.6 for 3 days.

The volatility is now 0.6% (9.5% annualised) and, although is back in its equilibrium point, the TGARCH curve is still slightly upwards sloping meaning that the up move was not really clear and that there was quite a lot of uncertainty before bulls won the battle.

Particularly, the fact that British Pound futures experienced an up move accompanied by an increase in volatility should highlight that the next week could see a potential retracement of the market and a consequent appreciation of the US dollar against the British currency.

Consequently, Pound futures should drop to 159 – 160 by the next Friday whilst volatility should achieve 0.62% – 0.63% (9.8% – 9.9% in annual terms) before getting back into the 0.6% area (9.5% annualised).

The staff of HyperVolatility remains bearish on British Pound futures and we will try to place some short positions as soon as the market is going to show some weakness in the price action.

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