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Pound Hedges Become Most Expensive Since Brexit as Fears Grow

  • Three-month risk reversals climb to highest since June 2016
  • Swings are salutary reminder of need for credible policy: ANZ
The pound slid to an all-time low of 1.0350 last week as the UK government’s tax-cut plan fueled fears of worsening public finances and quicker inflation.

The pound slid to an all-time low of 1.0350 last week as the UK government’s tax-cut plan fueled fears of worsening public finances and quicker inflation.

Photographer: Chris Ratcliffe/Bloomberg

The pound has bounced back from a record low but the worst may be yet to come.

Three-month pound-dollar risk reversals, which measure the premium of hedging against a drop in sterling, jumped to the highest since the June 2016 Brexit vote on Friday, signaling traders anticipate further losses. The UK currency slid as much as 0.8% Monday, and options show there’s a 24% chance it will decline to parity by year-end.