Geopolitical uncertainty, coupled with a packed schedule of central bank meetings, is driving investors toward long-gamma positioning, keeping the relative cost of hedging sterling volatility elevated this week. The one-week implied volatility for the pound against the dollar climbed to 6.76% on Friday, marking its highest level since late July, before easing to 6.02% at the London open.

The spread between one-week implied volatility and realized volatility has widened to 221 basis points, placing it at the 97th percentile of readings observed over the past two years. Meanwhile, the one-week risk reversal stands at 28 basis points, signaling a premium for put options over calls, though this is down from 55 basis points recorded on September 3.

Upcoming catalysts include policy decisions from the Federal Reserve and the Bank of England, alongside mounting concerns over slowing growth in the artificial intelligence sector and persistently elevated oil prices.