• FX options are forward-looking and thrive on FX volatility and any shifts in directional outlooks

• Recent price action in AUD/USD options suggest growing angst from participants on both measures

• Comes amid Inflation concerns, falling stocks and Mid East conflict escalation

• Implied volatility has increased - benchmark 1-month expiry is up almost 1.0 since Fri's NFP beat to 8.25

• Contract now sits above 1-month daily realised volatility 7.75 - often used as a fair value measure

• 1-week implied vol spikes as June 17 Fed enters expiry window, signalling elevated realised volatility risks

• 1-month 25 delta risk reversals have doubled to 1.2 AUD puts over calls since late May

• That's the highest downside over upside strike AUD/USD volatility risk premium since April
AUDUSD 1M VOL


AUD/USD 25 delta risk reversals


1-week expiry FXO implied volatility


(Richard Pace is a Reuters market analyst. The views expressed are his own)