• GBP recovers from mid week lows as UK fiscal worries ease for now

• Option implied volatility has also eased after big gains when GBP/USD fell

• Lower implied volatility recognises spot recovery/less realised volatility

• But risk reversals maintain a stronger downside over upside strike premium

• Recall they flipped aggressively from a GBP call to GBP put vol premium

• Shows caution for renewed GBP weakness that would increase FX volatility

• Related comment - The Reeves reversal: FX options flip GBP/USD risk premiums
GBP/USD risk reversals

(Richard Pace is a Reuters market analyst. The views expressed are his own)