LONDON (Reuters) – Sterling’s volatility soared on Monday to its highest level since the fallout from the Brexit referendum in mid-2016, after the British government’s fiscal plan unnerved investors and sent the pound to a record low against the dollar.
Finance Minister Kwasi Quarting, who unveiled a “mini-budget” on Friday filled with tax cuts and very little detail on how the government will finance it, doubled down on his pledge to cut taxes and ignored the impact of a short term market reaction.
Sterling’s three-month implied options volatility reached an intraday high of 19.785% on Monday, the highest since the Brexit vote result in late June 2016, when it topped 22%, according to Refinitiv data.
GBP/USD fell 5% earlier today to as low as $1.0372, the lowest since the decimal system in the early 1970s. It later recovered and recently settled against the greenback at around $1.0851, in one of the most volatile trading days in years.
