Traders Pay Up for Pound Hedges Guarding Against UK Budget Shock

Traders are paying a steep price for options protecting against dramatic swings in the pound as speculation ramps up over potential tax hikes in the UK budget.

Options contacts against the euro are now at the most expensive level in two years on a closing basis, evidence that investors are loading up on currency hedges that will cushion against volatility. With talks continuing to swirl over how Chancellor of the Exchequer Rachel Reeves will fill a budget hole, nerves are running high about the potential for market shock.