By Richard Pace — Oct 04 - 06:00 AM
FX volatility is gauged by implied volatility to determine FX option premium
Risk reversals gauge which direction is likely to generate most volatility
They show implied volatility premium for strikes in that direction vs other
EUR/USD benchmark 1-month 25 delta favoured downside strikes until mid Aug
Turned to topside for first time since 2022 when EUR/USD reached 1.1201
Was unable to sustain topside premium, despite another 1.12+ test in Sept
EUR/USD has subsequently fallen back to the lower 1.1000's
1-month risk reversals regain highest downside strike premium since July
Implied volatility flags NFP and U.S. election FX volatility warnings
For more click on FXBUZ
Source:
Refinitiv IFR Research/Market Commentary