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Bets on a Strong Pound Are Getting in the Way of a Strong Pound
Investor optimism on the pound hasn’t been this high for quite some time, yet that may have landed the currency in something of a Catch-22. Unlikely as it sounds, one reason why sterling is struggling to extend October’s sizzling run is probably an overwhelmingly bullish option-market bias. For one, traders already positioned for a stronger U.K. currency via derivatives may wait to get past the uncertainty around the Dec. 12 election before adding to allocations. Also, investors long on options tend to sell the currency in the spot market every time it rallies, in order to protect the value of their contracts -- ... (full story)
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