British Pound Futures Volatility Forecast (21/03/2011)

The last week we forecasted an initial drop of the price followed by a sharp recovery and so it was!!! British Pound futures opened at 161.5 dropped at 160.05 and then jumped back up again closing the week at 162.29: what a wonderful trade!!!

The volatility is now particularly high and the curve touched 0.61% (9.6% in annual terms) which is very close to the mean reverting point placed in the area between 0.62% – 0.625% ( 9.8% – 9.9% annualised).

Furthermore, the concerns about the war in Libya are probably going to get more attentions from investors and traders who will inevitably sell US dollars and buy Sterling. Consequently, the American currency should depreciate even more against its British counterparty and a further up move of Pound futures would not really be a surprise.

The staff of HyperVolatility remains bullish on British Pound futures because a drop in price towards the 164 area should be driven by a drop in volatility whose TGARCH curve should plummet to 0.58% -0.6% by Friday (9.2% -9.5% annualised).

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