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Feb 09 - 05:55 AM

GBP/USD - COMMENT-Potential Value In GBP/USD Options Over Significant Data

By Richard Pace  —  Feb 09 - 04:20 AM

FX option premiums are very low ahead of some big impending U.S. and UK data releases which could affect their respective monetary policy outlooks and reignite the FX volatility on which options thrive.

U.S.
CPI data will be key for the U.S. policy outlook on Tuesday, but there's also retail sales, industrial production, PPI, jobless claims, Philly Fed business conditions, preliminary University of Michigan February consumer sentiment and inflation expectations.
The UK has jobs data Tuesday, inflation, GDP, industrial production and retail sales later in the week.

From a volatility perspective, holders of shorter dated options will benefit if realised FX volatility outperforms the implied volatility set when the option was initiated.
Implied volatility is very low due to the current lack of FX realised volatility.

One week expiry GBP/USD implied volatility includes all of the data and at 7.0, is trading 2.5 below realised volatility measures for the past week - a potential fair value measure.
Benchmark 1-month expiry GBP/USD implied volatility at 6.3 is trading a 2-year low and only just above its past 1-month realised volatility measure.

Related FX option wraps nL8N3ET52PnL1N3ES1XF

For more click on FXBUZ

Source:
Refinitiv IFR Research/Market Commentary

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