• EUR/USD FXO implied volatility sits just above recent and long term lows

• Benchmark 1-month expiry is 6.9 versus 1-year low at 6.7 last week

• 1-month daily historic volatility 6.4 (actual volatility/fair value measure)

• However, 1-month expiry includes Fed and ECB policy decisions in mid June

• Low volatility levels reflect lack of conviction/range-bound spot market

• Risk reversals added volatility premium for EUR puts over calls last week

• 1-month is 0.3 - tame, but suggests implied vol can increase if EURUSD drops

• Spot market long which makes it vulnerable to setbacks - options can protect

For more click on FXBUZ