• EUR/USD FX options led a broad based collapse from 2-year highs on Tuesday

• Consistent with low realised volatility and expectations of ranges holding

• Demand for higher strikes and paring of 1.00 strikes reinforcing scenario

• Subsequent post U.S. data spot setback to mid 1.03's of little concern

• EUR/USD implied volatility sits on Tuesday's lows

• 1-month expiry implied vol 8.3 from 9.1 and 1-year 7.65 from 8.1

• Risk reversals sit well below recent highs for downside vs upside strikes

• Threat/break of option barriers from 1.0200 would likely reignite demand

• FX options wrap - EUR/USD leads collapse in volatility premium
1-3-12-month expiry EUR/USD risk reversals


EUR/USD FXO implied volatility

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