Sterling inched higher today after British Prime Minister Boris Johnson won parliamentary approval to hold a general election in December.

However sterling's moves were tiny as large currency options expiring this week kept volatility subdued. 

More than $2 billion worth of currency options with a strike price of around $1.29 and billions more between $1.24 to $1.32 are expiring on October 31, an original Brexit deadline, Refinitiv data showed.

The presence of such large derivative contracts means that banks and hedge funds would try to reduce overall market volatility in the pound as it could otherwise trigger these massive options and unleash large market moves. 

Boris Johnson, who has failed to deliver on his "do or die" promise that Britain would leave the bloc on October 31, secured the election agreement for mid-December just hours after the EU granted a third delay to Brexit. 

The pound was up 0.1% against both the euro at 86.29 pence, and the dollar at $1.2886, as the market assessed risks associated with the election, which will be held on December 12. 

The outcome of a US Federal Reserve meeting later this evening is also keeping overall market volatility subdued. 

The pound has rallied almost 5% so far in October, boosted in the week leading up to the EU summit where a new Brexit deal was approved.

Johnson pushed for the election in response to being unable to get this deal through parliament. 

While the risk of a no-deal Brexit had been taken off the table by most analysts, there is a risk that a Conservative win would embolden the pro-Brexit faction of the party who would push for a more damaging break from the EU. 

Michael Hewson, chief market strategist at CMC Markets, said "The pound will move on any move in opinion polls between now and the election. Whether we get a hung parliament or a Corbyn majority or a Tory majority is not clear." 

"The pound is likely to trade between $1.25 and $1.30 between now and then but it will be a bumpy ride," he said.