Pound Rises Amid U.S. Election and BoE Rate Uncertainty

The British pound gained marginally as markets await the U.S. election outcome and Bank of England's upcoming interest rate decision. Heightened political uncertainty increased currency options volatility, affecting the euro and Mexican peso. Traders remain cautious, speculating on potential interest rate cuts by June 2024.

The British pound showed a modest rise on Tuesday as global traders brace for the U.S. election results and a decision from the Bank of England regarding interest rates. These events add layers of uncertainty to already volatile international markets.

Currency options volatility surged, primarily impacting the euro and Mexican peso, which are sensitive to U.S. trade and foreign policy. As a result, sterling options rose significantly, hitting their highest levels since the regional U.S. banking crisis earlier this year.

Amid political and monetary turbulence, the pound remained relatively stable in Europe, boosted by speculative trades on future interest rate adjustments. Meanwhile, the BoE is anticipated to lower interest rates by a quarter-point, a move mirrored by the U.S. Federal Reserve, but with more cautious long-term expectations from traders.

(With inputs from agencies.)