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Busier CNY, GBP Make Up for Quieter EUR, JPY Hedges
- Following an understandably muted session for currency hedging markets on Monday, activity bounced back yesterday with near $110bln notional crossing via the DTCC. Wednesday trade so far is slightly more muted, but busier CNY, AUD and GBP hedges are compensating for quieter JPY and EUR trade.
- The front-end of the G10 vol curve is seeing small support, as the pullback in USD vols evident off the April highs begins to slow, and partially reverse. This keeps GBP/USD 1m vols in line with the YTD average of ~6.5 points.
- GBP/USD activity so far today leans toward upside demand, with decent interest in short-dated call strikes layered between $1.2500 and 1.2530 largely responsible – a decent part of which expire on Friday – thereby capturing tomorrow’s BoE event risk.
- The normalization of the CNY vol curve off YTD lows (3m risk reversal vols briefly shifted to favour USD/CNH puts over calls for the first time since 2011 in March) persists, with upside exposure again the theme: over $3 in calls have traded for every $2 in puts, with demand for call strikes evident as high as Cny 7.2700-7.2850.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.