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EUR/USD Downside In Focus After Busiest Options Trading in Months

OPTIONS
  • Solid start Friday for FX hedging volumes, after two consecutive sessions of very busy markets. Wednesday and Thursday saw ~$130bln and ~$120bln total notional trade, making for the some of the busiest sessions of the year so far.
  • Options trade over the past few sessions has been typified by the overriding USD strength, evident in the solid demand for EUR/USD puts. Most salient trades tended to revolve around 1.07 put strikes. An eye-catching $4.1bln notional has been wagered against 1.07 put strikes across the past two sessions alone, trades which are now in-the-money thanks to this morning’s weakness in spot.
  • The breakout for the USD and closing proximity to potential policy pivots from the Fed and ECB continues to support the belly of the EUR vol curve, with 3m implied now topping 6 points for the first time since mid-February, capturing the very live June 6th ECB meeting, and the lead-up to the coin-toss July Fed meeting (but importantly not the decision itself).
  • Similarly, persistent USD/JPY strength and little sign of pushback from the Japanese authorities has driven trade in USD/JPY topside – with Y152.50-154.00 call strikes seeing an impressive $8.3bln notional interest. Perhaps more interestingly, call strikes as high as Y155.00 also saw solid interest, with over $1bln traded.
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