Implied volatility in EUR/GBP has surged as investors turn cautious ahead of tomorrow’s UK Budget, according to ING FX strategist Francesco Pesole. Despite recent stabilisation in long-dated gilts, currency markets remain on alert.
Markets Cautious Ahead of Budget Announcement
Pesole notes that one-week implied volatility in EUR/GBP is now trading three volatility points above realised levels, marking the largest divergence since the UK’s 2022 Mini-Budget turmoil. This wide gap highlights persistent market concerns surrounding the upcoming fiscal announcement.
For now, the pair is expected to hover near 0.880, with traders largely adopting a wait-and-see stance. However, Pesole cautions that any pre-Budget leaks or media reports could shift sentiment and move the market—a risk that “should not be underestimated.”
