• Volatility is an unknown yet key part of an FX option premium

• Implied volatility is a stand-in and therefore an FX volatility bellwether

• Implied volatility higher since U.S. election amid Trump policy risk

• Entire 1-12-month term structure was by recent and 2-year highs on Monday

• However, Donald Trump didn't immediately implement tariffs as was feared

• USD slipped, reducing volatility and EUR/USD downside risk, implied vol fell

• Implied volatility slump could continue, especially if spot extends recovery

• Huge expiries and related hedging flows might influence Tuesday
EUR/USD FXO implied volatility

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