• As with most G10 FX options - EUR/USD implied volatility drops to levels last seen before US/Iran conflict

• Implied volatility gauges FX realised volatility - current and future, so the implied vol drop speak volumes

• Benchmark 1-month implied volatility at 5.65 is still above 1-month past realised volatility at 5.15

• Low realised highlights the lack of volatility and argues that even 5.65 implied vol is expensive

• Risk reversals show any implied volatility premium for strikes in one direction over the other

• Unsurprisingly - 1-3-month 25 delta benchmarks hold a downside over upside premium in case of risk aversion

• However, that premium is minimal at 0.3 from 3-year highs at 1.7 in early March when the conflict started

• In summary - EUR/USD price action is consistent with continued low realised volatility within familiar ranges

• Related - FX options wrap - When nobody's scared, be scared
EUR/USD FXO implied volatility


EUR/USD risk reversals


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