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  • The value of the out of the money put options on the GBP/USD pair has hit the highest level since June 8, 2017, risk reversals indicate.
  • The increased demand for the put options indicates the investors are likely expecting a deeper drop in the GBP/USD pair.

The GBP/USD one-month 25 delta risk reversals (GBP1MRR) fell to -1.70 earlier today – the lowest level since June 8, 2017 – meaning the implied volatility premium or demand for the GBP puts is at its highest in 16 months.

More importantly, the risk reversals have dropped sharply in the last few weeks from the high of -0.8 seen at the end of August.

It is worth noting that the put value has hit multi-month highs a day after the pair the trendline rising from Aug. 15 lows. So, it seems safe to say that investors are expecting a deeper drop in the British pound.