Correlation play eyed via vol swaps
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Correlation play eyed via vol swaps

Investors should consider volatility swaps should the correlation between euro/sterling and sterling/dollar turn positive, therefore widening the volatility spread between the two currency pairs. Sterling/dollar has recently been skewed to the upside, while euro/sterling has dropped since Bank of England governor Mark Carney threatened to hike interest rates earlier than the market expected; meaning the correlation between the two currency pairs has been strongly negative.

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