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Jan 22 - 11:55 AM

EUR/USD - FX Options Wrap - BoJ Risk, FX Clues, Expiries, EUR/USD Gains

By Richard Pace  —  Jan 22 - 09:55 AM

Overnight expiry options now include Tuesday's Bank of Japan policy announcement and despite a broad consensus for the status-quo, increased premiums for JPY related FX volatility should alert traders to risks other than an immediate policy tweak.

FX realised volatility in the major pairings continues to trade at 2-year lows and that's keeping pressure on broader based G10 FX option implied volatility.
A lack of FX volatility premium and demand comes despite a fairly busy week in terms of central bank meetings and data, so doesn't bode well for those expecting FX realised volatility to increase.

If FX realised volatility remains subdued this week, the few larger G10 FX option strike expiries and their related hedging flows may have more of a bearing on FX.

Those looking for EUR/USD direction won't find any answers from risk reversal contracts.
While the downside strike premium on a 1-month expiry is at long term lows, there's been no premium for topside strike options since November 2022.

USD/CNH option implied volatility is drifting back toward longer term lows.

For more click on FXBUZ

Refinitiv IFR Research/Market Commentary


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