FX options wrap - Elections, intervention and data risks ahead
Overnight expiry euro related options have seen their FX volatility risk premiums increase since expiry now includes the first round results of the impending French elections. The premium/break-even for overnight EUR/USD opened inLondon around 70 USD pips - a new 2024 peak.
There's a clear preference to own EUR/USD downside strikes as reflected by risk reversals - their EUR put over call implied volatility premiums saw a significant leap to new long term highs in mid June and continue to attract demand.
USD/JPY implied volatility is elevated to reflect risks of higher spot and potential intervention. However, current levels are far below those seen before the April 29 intervention and the JPY call over put premiums is very low - implying that the options market doesn't see the threat as imminent.
Price action and volatility premiums in GBP related options remains subdued and would suggest the market sees little risk of next week's UK election making a significant impact on GBP.
One-week expiry USD related options have seen their implied volatilities increase as expiry now includes the July 5 U.S. nonfarm payrollsdata, but overall premiums are being weighed by the July 4 U.S. Thanksgiving holiday and its typical real volatility crushing impact.
Larger FX option strike expiries for the week ahead.
For more click on FXBUZ
1-month and 1-year expiry EUR/USD 25 delta risk reversals https://tmsnrt.rs/4bn3jJe
EUR/USD FX option strike expiries June 28 through July 5 https://tmsnrt.rs/3znJQel
(Richard Pace is a Reuters market analyst. The views expressed are his own)
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