• GBP/USD FX implied volatility is low before a raft of UK data, but that doesn't mean current prices are cheap

• Implied volatility gauges realised volatility risks when determining an FX option premium

• If actual/realised FX volatility outperforms implied - volatility holders can profit, and vice versa

• 1-week GBP/USD implied vol at 4.6 is near long term lows before UK Jobs, CPI, retail sales and PMI data

• However, 1-week realised volatility (over past week) is just 2.82, so a decent pick-up is required to reward long volatility positions

• Benchmark 1-month expiry GBP/USD implied vol was equal to daily realised at 4.75 Friday but now 5.4 due to Fed inclusion
gbp/usd 1-month implied vs realised vol


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