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One-month risk reversals on GBP/USD, a gauge of calls to puts, jumped to 3-1/2 month highs on Thursday, indicating a weakening of demand for put options or bearish bets on the British pound. 

Risk reversals rose to -1.00, the highest since March 11, having hit a low of -6.6 in March. The gauge has increased from -2.15 to -1.00 in the last three weeks, contradicting the pair’s decline from 1.28 to 1.2252. 

Clearly, the options market does not foresee prolonged weakness in GBP/USD and is positioning for an upswing. 

At press time, the pair is trading largely unchanged on the day near 1.2462.

Risk reversals