💷🔻Sterling Skewness Shifts Bearish As Options React to Spot: Cable FX Macro

• Markets now price 100bps of cuts by end-2026 (from 75bps pre-Budget), with 25bps cut odds at 90% for Nov 7. Swap spreads (UK – US 2-year) collapsed to -150bps, a 15-year low. Fiscal concerns and recent data have pushed markets to shift its outlook on the BoE, previously seen among the hawkish central banks in the G10.

• Chancellor Rachel Reeves’ £40bn tax hike + borrowing plan triggered a gilts selloff (10-year yield +35bps to 4.55%), eroding GBP yield support. OBR forecasts weaker growth (1.1% 2025) and higher inflation (2.6% peak). The budget will be released next month.

• The front-end has now seen a decent bearish shift as the spot market saw sterling break below the 200DMA and test 1.30. The two week tenor saw the largest repricing as it move 32bps to 57.5bps in favour of GBP/USD puts. The tenor covers the BoE monetary policy decision and GDP, employment data.