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May 22 - 06:55 AM

EUR/USD - Latest EUR/USD Clues From The FX Options Market

By Richard Pace  —  May 22 - 05:40 AM
  • 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

Refinitiv IFR Research/Market Commentary


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