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UPDATE 4-Sterling volatility gauges jump as investors fear Brexit showdown

Olga Cotaga

* Johnson defends his one-month suspension of parliament

* Three-month implied volatility hits 2019 high

* Recent sterling selling limited, some analysts see upside

* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

* Graphic: Trade-weighted sterling since Brexit vote http://tmsnrt.rs/2hwV9Hv (Updates prices)

LONDON, Aug 29 (Reuters) - Traders are bracing for more big price swings in the pound between now and the expected Oct. 31 Brexit date after Prime Minister Boris Johnson moved to suspend parliament, with a volatility gauge on Thursday hitting its highest level of 2019.

Johnson on Wednesday announced plans to suspend parliament for more than a month from early September.

The move has outraged his opponents as it limits the time available to prevent Britain exiting the European Union without a divorce deal on Oct. 31. It also raises the chances he will face a vote of no confidence and possibly a national election.

Three-month sterling implied volatility - a gauge measuring expected price swings in the pound between now and end-November - rocketed to its highest since December. The one-month measure rose to a four-month high while the six-month gauge was at its most elevated since January.

The pound fell sharply on Wednesday as Johnson's move threw down the gauntlet to his opponents to try to bring his government down, or step aside as he pursued his "do or die" Brexit policy by Oct. 31. Johnson has defended the suspension and said there will be plenty of time for lawmakers to debate Brexit.

It remained weak on Thursday, trading down 0.1% at $1.2195 by 1530 GMT <GBP=D3. It was neutral against the euro however at 90.69 pence.

"This price action reflects concerns that the little time that remains for parliament to attempt to block a no-deal Brexit will now be even shorter," said Lee Hardman, currency analyst at MUFG.

The pound's decline has been relatively modest this week because most investors already thought a no-deal Brexit was the most likely outcome, judging by positioning data and derivatives pricing, analysts said.

Traders said much of the action was in investors rushing to protect themselves from more volatility rather than placing bets on further falls in the currency.

Risk reversals - the skew between put and call options - suggest traders see the pound as more likely to fall than rise in the next three months, but they are not as bearish as they were earlier this month.

Most members of parliament oppose a no-deal Brexit and they still have some time to call a vote of no confidence, but Johnson is not bound by law to resign, which complicates things further, analysts say. Parliament reopens for business on Sept. 3, but will be "prorogued" - suspended - the following week until Oct. 14. However, if a Brexit deal is agreed on before the deadline or if Britain and the EU were to agree to put back the departure date by extending the so-called Article 50, the pound could strengthen sharply as there are no barriers to prevent it doing so, analysts say. "Despite the noise, the poor mood music and proroguing, the path of least resistance is still for sterling topside as a lot of the negativity is in the price," said Jordan Rochester, currency analyst at Nomura. "But (pro-EU) Remainer MPs have to act fast and swiftly for this tactical trade to become longer term," Rochester said, adding the bank held a short euro/sterling position.

(Additional reporting by Tommy Wilkes Editing by Larry King, Kirsten Donovan)