LONDON (Reuters) – Sterling traders rushed to hedge against big price moves on Wednesday, with just hours to go before Labour finance minister Rachel Reeves’ first budget, while the pound held steady against the dollar and the euro.

One-week implied options volatility – a measure of demand to protect against large moves in the pound over the coming week – rose to 10.375%, the highest since March 2023.

The overnight rise from around 6.325% was the largest one-day increase in one-week implied vol since September 2022, when then-Prime Minister Liz Truss unveiled budget plans with billions of pounds in unfunded spending that threw UK markets into crisis.

It’s budget day in the UK, and while these events rarely pose the sort of risks to price action that warrants real focus on positioning, this one is different,” Pepperstone strategist Chris Weston said in a note.

“It is seen by some as a generational budget, that will define Chancellor Reeves’ career and could significantly impact Keir Starmer’s public approval rating, which has been shot to pieces of late.”

The Labour Party’s first budget in 14 years on Wednesday will end months of speculation about how much Reeves and Starmer will borrow for infrastructure investment and how hard they will hit taxpayers.

The pound was last down 0.1% on the day at $1.3008.

Implied volatility on one-week options, which crucially gives traders the possibility to hedge any price risk stemming from the U.S. presidential election next week, also rose for other currencies, but by far less than for sterling.

One-week euro vol traded around 6.285%, the highest since early October, while one-week yen vol touched its highest since mid-August, at 16.495%.

Sterling 1-week implied options vol hit its highest since March 2023; last at 10.375%, set for its biggest one-day rise since September 2022.

(Reporting by Amanda Cooper; Editing by Jane Merriman)