Finance
Sterling options volatility nears 'Liberation Day' highs ahead of UK budget
Published by Global Banking & Finance Review®
Posted on December 9, 2025
1 min readLast updated: January 20, 2026
Global Banking & Finance Review®
Company
Published by Global Banking & Finance Review®
Posted on December 9, 2025
1 min readLast updated: January 20, 2026
Sterling options volatility spikes to its highest since April as traders anticipate the UK budget. Euro/sterling volatility reaches 12.2%, reflecting market nervousness.
LONDON (Reuters) -The cost of hedging against big near-term moves in the pound against the euro shot to its highest since April on Tuesday, reflecting trader nervousness ahead of finance minister Rachel Reeves' budget in a day's time.
Overnight implied options volatility, a measure of demand to own derivatives to protect against turbulent price action, shot to as much as 12.2% for euro/sterling. That was the most since April, when U.S. President Donald Trump's initial "Liberation Day" tariff announcement stirred up extreme market turbulence and the measure hit 15%.
It was last at 10.82%, according to LSEG data.
(Reporting by Amanda Cooper; Editing by Andrew Cawthorne)
Currency hedging is a financial strategy used to protect against potential losses due to fluctuations in exchange rates. It involves taking an offsetting position in a related currency to mitigate risk.
Foreign currency refers to any currency that is not the domestic currency of a particular country. It is used in international trade and investment and can fluctuate in value against other currencies.
Financial markets are platforms where buyers and sellers engage in the trading of assets such as stocks, bonds, currencies, and derivatives. They facilitate the flow of capital and liquidity in the economy.
Implied volatility is a metric that reflects the market's expectations of future volatility in the price of an asset, often derived from the pricing of options. Higher implied volatility indicates greater expected price fluctuations.
The UK economy refers to the economic system of the United Kingdom, characterized by a mixed economy that includes various sectors such as services, manufacturing, and finance, influencing global economic dynamics.
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