• FX option risk reversals charge a volatility premium for strikes in one direction versus the other

• Its a volatility play, but pricing offers clues on the perceived directional risks in a currency pair

• Benchmark 1-month expiry EUR/USD 25 delta risk reversals have seen a recent shift in pricing

• The contract has lost its downside over topside strike premium for the first time since February

• Though yet to adopt a topside strike premium, pricing shows risk tilting toward EUR/USD gains

• Related - FX options wrap - EUR/USD topside, Fed risks, cheap GBP/USD protection
EUR/USD 25 delta risk reversals


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