Long road to Brexit throws up hedging conundrum

By Ross Lancaster
02 Oct 2020

Political uncertainty over the UK’s trade negotiations with the EU and the Bank of England’s flirtation with negative interest rates are creating a conundrum for foreign investors, with the timing of protecting an FX position proving hard to judge.

For dollar denominated investors in the UK, hedging FX exposure on sterling positions has become a dilemma. In G10 countries, political risk events are usually elections and follow a fairly ordered playbook. Investors react to opinion polls and research notes that are mostly received at the same time.

But ...

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