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Jan 20 - 06:55 AM

USD/CAD - Volatility Traders Favour BoC Above Retail Sales

By Richard Pace  —  Jan 20 - 04:55 AM
  • Implied volatility gauges actual volatility expectations to price options

  • It can therefore offer clues on expectations over key events

  • No gains in overnight vol on Thurs when expiry captured Fri Cnd retail sales

  • Suggest markets expect little or no reaction in actual volatility from data

  • However, 1-week expiry implied volatility jumped over 1.0 vol on Thursday

  • That's when expiry captured Wednesday's BoC policy decision

  • Not a huge leap but flags expectations of increased volatility from decision

  • Interest rate probability shows 64% chance of a 0.25% BoC hike to 4.5%

  • That data also shows 4.5% is currently expected to be the terminal rate

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Refinitiv IFR Research/Market Commentary


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