The British pound fell more than 1 against the U.S. dollar on Wednesday as investors sold riskier currencies, with early results in the U.S. election showing a tight race between Democratic challenger Joe Biden and President Donald Trump.
Overnight implied volatility gauges in sterling have come off the multimonth highs they reached on Monday, indicating the cost of protecting against unexpected nearterm moves in the currency has fallen.
Trump was leading in key battleground states, including Florida and Ohio. The question now is whether he can retain the states Michigan, Wisconsin and Pennsylvania that sent him to the White House in 2016.
Betting market odds on the election have flipped to favour Trump over Joe Biden, according to data from two aggregators.
Sterling is now trading as if its more open to global growth and global risk … similar to what we see in the Norwegian crown or Australian dollar, said Simon Harvey, currency analyst at broker Monex.
The Nokkie and the Aussie usually swing in correlation with investor risk appetite and moves in those currencies are often exacerbated by that.
Sterling used to be trading roughly in line with the euro or Japanese yen but now were seeing these big moves in cable sterlingdollar, Harvey said.
Against the dollar, the British currency fell more than 1.1 to 1.2915 in early London trading. The day before that, it had jumped to 1.3140, its highest in two weeks.
Sterling also weakened 0.6 versus the euro at 90.25…