Currency traders are increasing their bets against sterling ahead of Wednesday’s Budget, fearing that Rachel Reeves’ tax and spending plans could further weaken the UK’s already fragile economic outlook.
Data from CME Group shows trading volumes in put options — contracts that profit from a fall in the pound — have outpaced bullish call options by more than four to one over the past week. The surge suggests investors are bracing for a Budget that could push sterling lower.
Dominic Bunning, head of G10 FX strategy at Nomura, said the pattern “points to a market that is well positioned for a challenging outcome for the pound.”
The pound, already close to its weakest level against the dollar since April, traded at $1.312 on Tuesday, after weeks of soft economic data and falling inflation encouraged traders to price in earlier Bank of England rate cuts — typically a drag on a currency.
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