Question

The market bid/ask quote for $/£ is $1.4397 - 1.4402. A market maker has a strong opinion about the future direction of the pound and places his quote as "98-03". Which currency does the market maker expect to appreciate?

Answer 1

$/£ is $1.4397 - 1.4402

Quotes of market maker = 1.4398 - 1.4403

Since market maker is willing to place bid for £ at $1.4398 instead of market bid of $1.4397, he expects £ to appreciate and $ to depreciate

(Also, he is placing ask bid to 1.4403 that is he wants to sell one £ at $1.4403 while the market is willing to sell it at $1.4402; which reflects his expectation for £ to appreciate).

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