LONDON, Nov 5 Reuters The pound edged up on Tuesday as traders awaited the outcome of a U.S. election that has proven too close to call for weeks, and separately, the Bank of England39;s decision on interest rates later in the week.
Recent opinion polls have shown Democratic Vice President Kamala Harris and Republican former President Donald Trump virtually neck and neck, meaning the outcome might not be clear for days, or even weeks after voting ends.
With such immediate uncertainty hanging over the market, currency options volatility shot up on Tuesday, particularly for those currencies that are more sensitive to U.S. trade and foreign policy, such as the euro and Mexican peso.
Sterling options vol also rose, pushing overnight and oneweek vol a measure of trader demand for protection against big nearterm swings in the pound itself to their highest since March 2023, when a U.S. regional banking crisis roiled markets.
The pound, meanwhile, held reasonably steady in Europe, rising 0.2 to 1.2985.
Against the euro , the pound held at 83.91 pence, not far off last week39;s twoandahalf month lows after British finance minister Rachel Reeves39; hightax, highspend and highborrowing budget plan sparked political and monetary uncertainty.
Alongside the budget, the Office for Budget Responsibility OBR trimmed its growth forecasts beyond 2025 and forecast UK inflation will average 2.6 in 2025, up from a previous forecast of 1.5 back in March, prompting traders to pare back…