(Adds link to todays large expiries on line 4)

• EUR/USD FX option implied volatility sits close to recent lows - benchmark 1-month expiry 5.0

• Risk reversal contracts lack directional risk premium - 1-month skew neutral, easing from prior downside

• Trade flows show little conviction for EUR/USD to trade far in either direction

• More big FX option strike expiries and related hedging still helping to contain FX price action

• However, there is plenty of short term volatility risk premium in prices - flagging near term event risks

• Overnight options jumped since including Friday's US CPI, having almost ignored today's ECB and US PPI

• 1-week expiry implied volatility has risen sharply now that it captures the September 16 Fed decision

• Price action suggests the Fed could the much needed catalyst for any EUR/USD movement
EUR/USD FXO implied volatility


EUR/USD 25 delta risk reversals

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