EUR/GBP risk reversals: Bearish bias is strongest in two years

• EUR/GBP one-month 25-delta risk reversals have hit the lowest level since April 2017. 
• The data indicates the bearish bias on EUR/GBP is strongest in over two years. 

Investors are most bearish on the EUR/GBP exchange rate in over two years, one-month 25-delta risk reversals indicate.

The gauge of puts to calls on the EUR/GBP pair is currently trading at -0.55 in favor of put options (bearish bets), the lowest level since April 2017.

It is worth noting that risk reversals were flashing a bullish EUR bias about five weeks ago. On March 25, the gauge was trading at 1.38. The shift in market sentiment could be associated with Brexit optimism.

A negative number indicators the implied volatility premium (or demand) for put options is higher than that for calls, while a positive reading represents a higher premium for call options (bullish bets).

Risk reversals