LONDON: The cost of hedging against volatility in sterling over the next three months fell by the most in a year on Monday, as investors' bets on Brexit ebbed after the U.S. president voiced his support for Britain remaining in the European Union.
President Barack Obama said on Sunday that Britain might have to wait a decade for a free trade deal with the United States if it votes in June to leave the European Union, adding to his warning on Friday that Britain would find itself at "the back of the queue" for a new trade agreement if it departed the EU.
Data from betting website Betfair showed the chances of Britain staying in the EU surged on Monday to their highest since September last year, with the chances of a Brexit falling to around 27 percent, down from 37 percent this time last week.
Three-implied sterling/dollar volatility, derived from options that cover the June 23 referendum and its aftermath, fell to a one-month low of 13.75 percent. That was a 7.5 percent drop on the day - the biggest one-day fall since the results of last May's British general election.
Six-month implied volatility fell to a six-week low of 12.425 percent, while sterling soared to a 10-week high of $1.4520.
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