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Corporate Hedging Recommendation: GBP Downside
Corporate Hedging Recommendation: Participating In GBP Downside
Click here for the full Note and disclosures.
• GBP remains vulnerable in the
medium term as de-leveraging in the public, household and
banking sectors weighs on growth. A massive fiscal
consolidation is necessary in the UK and we expect further
declines in GBP as a result.
• For sellers of EUR/GBP, we recommend hedges which are able to participate in possible EUR strength in the medium term.
• EUR/GBP skews remain elevated and appear rich relative to the realized spot/vol correlation; we recommend hedgers take advantage of these favorable levels through zero-cost collars.
• Similarly, GBP/USD skews are cheap, making collars attractive for buyers of GBP against USD
ENDS
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