British Pound Futures Volatility Forecast (22/08/2011)

The last week’s worst scenario analysis suggested a jump of British Pound futures in the 163 – 164 zone and effectively so it was. In fact, the bad macroeconomics data added to the delirium of Germany and France prime ministers contributed to destroy the last hope of recovery.

British Pound futures opened at 163.7 on Monday, touched 164.5 on Tuesday, jumped to 165.3 on Wednesday, dropped to 165.1 on Thursday and closed at 164.7 on Friday.

The actual volatility is 0.53% (8.4% in annual terms) and the TGARCH plot is visibly displaying a fairly stable curve, although slightly upward sloping, which has now touched its long term equilibrium point implying that the next days could see a similar amount of fluctuations in futures prices.

The great uncertainty and fear surrounding most of the equity markets is pushing many investors and traders to buy more and more dollars. At the same time the European debt crises is keeping money away from the Pound Sterling and the Euro whilst big flows are observed towards Swiss Franc and Japanese Yen.

The HyperVolatility team is moderately bearish British Pound futures because the volatility should keep increasing, although sensibly, in the upcoming trading sessions implying a further drop of the price action which could retest the 162 area by the next Friday.

Additionally, an ulterior violent plunge of equity markets would make the US dollar appreciate even more against European currencies and futures prices could even hit the 160 support level should the sell-off be as aggressive as the one we saw in the previous 10 trading days.

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