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Foreign Exchange

Brexit and Covid-19 drive record sterling trading in latest Bank of England survey

The Bank of England’s latest FX trading survey shows how sterling trading exploded in October amid the twin pressures of Brexit and the coronavirus pandemic.

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Photo: iStock

Euro/sterling daily trading leapt to a record in October, according to the latest semi-annual survey from the Bank of England (BoE).

Average turnover reached $82 billion, up 50% from the previous survey in April. Turnover of USD/GBP, meanwhile, rose 11% to $326 billion.

The analysis, conducted by the bank’s foreign exchange joint standing committee, covers 27 financial institutions active in the UK FX market.

The swaps data series has been … difficult to understand
Simon Manwaring, NatWest Markets
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Sterling volumes were driven by the UK’s departure from the European Union as well as the meltdown in risk markets and their subsequent recovery, which led to heightened volatility, said analysts.

“One-month volatility in EUR/USD was stable or fell through most of the second half of last year, yet GBP/USD one-month volatility continued to rise through October,” says Geoff Yu, senior EMEA markets strategist at BNY Mellon.

October in particular was characterized by EU-UK negotiations intensifying before the year-end arrival of Brexit.

“Volume on GBP pairs was higher than for the rest of G10 and therefore it shouldn’t be surprising that this was met by higher volumes relative to [the April data],” says JPMorgan global FX strategist Meera Chandan.

Simon


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