The FX market is currently experiencing a period of remarkable calmness, with the Pound displaying an unexpected level of stability. According to Joseph Capurso, Head of International and Sustainable Economics at Commonwealth Bank, "Implied volatility is particularly low in GBP, at close to the lowest in the past thirty years." This stability marks a significant shift from the Pound's previous volatility, often linked to political events such as the 2016 Brexit referendum. However, an improvement in the UK's domestic political scene and diminishing Brexit uncertainties have contributed to the currency's current steadiness.
Moreover, the economic outlook for the UK, despite being characterized by a stagnant economy, has been relatively stable. This outlook is supported by consistent messaging from the Bank of England on its interest rate policy, further reinforcing the low-volatility environment for the Pound. In its exchanges against the Euro and the Dollar, the Pound has maintained a narrow trading range, with the Pound-to-Dollar rate experiencing a notably tight 250 pip range in 2024. Similarly, the Pound-to-Euro rate has seen a tightening to a 100-pip range since mid-January, highlighting an unusually stable period for the currency.
Source: poundsterlinglive.com