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Antipodean FX Isolated in Pre-CPI Vol Swings

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  • In typical pre-CPI trade, front-end FX vols are well bid, with G10 overnights cresting close to YTD highs and reinforcing the perceived importance of the US inflation print later today.
  • AUD, NZD are isolated in posting the most notable vol premium this month, underlining their risk proxy status, sensitivity to the Fed policy cycle and the importance of recent positioning cycles - which have seen NZD shorts account for over 20% of open interest, contrasting with a sharp positive momentum shift in the AUD net position since the nadir in mid-March.
  • AUD/USD overnight vols neared 20 points this morning, the highest in just under a year, blowing out the break-even on an ATM straddle to near 60 pips - well over double the swing implied by average background vol so far in 2024.
  • Across EM currencies, MXN and ZAR vols are posting the most sizeable two-day vol premiums (8.4 and 8.0 vol points respectively) ahead of the CPI print, potentially suggesting greater sensitivity in these currencies into the Thursday NY cut. Interestingly, both currencies also exhibit notable political risk premia, with both Mexico and South Africa holding Presidential election polls toward the end of the month.


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  • In typical pre-CPI trade, front-end FX vols are well bid, with G10 overnights cresting close to YTD highs and reinforcing the perceived importance of the US inflation print later today.
  • AUD, NZD are isolated in posting the most notable vol premium this month, underlining their risk proxy status, sensitivity to the Fed policy cycle and the importance of recent positioning cycles - which have seen NZD shorts account for over 20% of open interest, contrasting with a sharp positive momentum shift in the AUD net position since the nadir in mid-March.
  • AUD/USD overnight vols neared 20 points this morning, the highest in just under a year, blowing out the break-even on an ATM straddle to near 60 pips - well over double the swing implied by average background vol so far in 2024.
  • Across EM currencies, MXN and ZAR vols are posting the most sizeable two-day vol premiums (8.4 and 8.0 vol points respectively) ahead of the CPI print, potentially suggesting greater sensitivity in these currencies into the Thursday NY cut. Interestingly, both currencies also exhibit notable political risk premia, with both Mexico and South Africa holding Presidential election polls toward the end of the month.