British Pound Futures Volatility Forecast (17/01/2011)

British Pound futures recently experienced a sharp rally and the drop in volatility confirmed the steadiness of the move. The volatility plot is showing a situation which is clearly dominated by uncertainty, even if the last part of the chart displays an upward sloping curve.

The current market volatility is 0.48% (7.6% annualised) and it appears that this figure will keep rising over the next week. Specifically, the volatility will tend to get back to its equilibrium level which is attested to 0.58% (9.20% annualised) and this could destabilise the price action.

On the other hand, the depreciation of the dollar could bring back Pound futures to the 160 area and therefore the staff of HyperVolatility suggests to opt for a buy and hold strategy at least for this week.

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