The options market is betting on a decline in the pound, and political risk continues to exist.

Convera's Antonio Ruggiero said in a report that the pound has stabilized, but due to lingering political concerns, options market investors continue to buy protection to hedge against the risk of a long-term decline in the pound. He said that the political risk premium on the pound has decreased somewhat after UK cabinet ministers expressed support for Prime Minister Keir Starmer. The risk reversal index shows that the skew of call options betting on the euro rising against the pound has moderated more in short-term contracts than in long-term contracts. He said this suggests that investors still anticipate political turbulence, but now are more inclined to hedge against longer-term weakness in the pound. "In short, investors believe that political risk has diminished, but has not disappeared." The euro fell 0.1% to 0.8687 pounds.