• FX option implied volatility gauges FX realised volatility risk

• Risk reversals show which direction that volatility is most likely

• No surprise that EUR/USD risk reversals spiked for topside strikes last week

• Benchmark 1-month 25 delta reached new highs since 2020 at 0.9

• However, there's been a significant retracement and its now back at neutral

• Comes amid EUR/USD setback from 1.1147 to 1.0880 as USD recovers ground

• USD battles risk aversion support vs weight from loss of US exceptionalism

• However, that uncertainty keeps implied volatility at extremes
EUR/USD risk reversals

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