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AUD/USD Breakevens Spill Wider Ahead of RBA Event Risk

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  • Front-end AUD/USD vols see support Monday, with the overnight contract now capturing the RBA rate decision. Implied vol clears 15.5 points, and has touched the highest since September today, with the vol premium added today the largest since the August RBA, at which markets were split between unchanged and a 25bps hike.
  • An overnight AUD/USD straddle breaks even on a ~45pip (vs. 3m average ~20-25pips) swing in the pair, the widest break-even pricing for the pair since Sep13 as markets awaited the August Australian jobs report. Such a move in the pair would bring expiries layered between 0.6460-80 into play, across which A$584mln is set to roll off.
  • Market consensus looks for AUD/USD to moderate to 0.64 by year-end, an outcome for which markets imply a 29.5% probability today - a considerable drop in implied pricing that stood at 49.7% a week ago and before the recent wave of USD weakness.
  • RBA rate decision due at due 2.30pm local time/0330GMT/2230ET, full MNI Preview here: https://roar-assets-auto.rbl.ms/files/56807/RBA%20...

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