• FX option implied volatility is underpinned but overall gains limited amid recent souring of risk sentiment and firmer USD

• AUD/USD implied vol sees biggest G10 gains given its high sensitivity to risk-off flows

• Last week's low AUD/USD vol prices highlighted value for hedgers — spot drop and vol gains proved them right

• EUR/USD vol gains modest by comparison, but risk reversals increase EUR put over call premium to recognise downside risks

• EUR/USD benchmark 1-month 25 delta risk reversals reach 0.6 - will support vols on any deeper spot declines

• However, overall G10 FX vol gains contained — levels remain closer to Mid-East conflict lows than the early March highs
Benchmark 1-month expiry FXO implied volatility


EUR/USD 25 delta risk reversals


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