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For years the options market that companies and investors use to hedge against big swings in currencies viewed the euro as a bigger political and structural risk than Britain's pound.Reuters data going back to 2012 shows three- and five-year risk reversals – the cost of taking out an option to buy or sell the pound – have consistently been below zero.Since an initial jump in the first six months of 2016, both three- and five-year euro-sterling risk reversal contracts have held consistently in positive territory, indicating the tail risk – the risk of a low probability, high impact event – is now instead with the pound.With the pound pummeled by political and economic uncertainty, the euro-sterling five-year risk reversal Thursday matched its highest in 11 months, showing an increased bias toward sterling weakness.
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