EUR/USD short-dated vols remain well....>

EURO-DOLLAR: EUR/USD short-dated vols remain well bid with 1w implied volatility

touching the highest level since May last year and the political risk that

surrounded the French general elections. EURUSD 1w risk reversals are also

dropping in tandem.

While short-dated vols have been rising, the opposite is true for 1m+ vols which

continue to decline in almost all the major pairs. Investors are clearly

becoming nervy over a weekend of risk including the Italian elections and the

German SPD member vote, both of which could throw up roadblocks to the current

political systems in Rome and Berlin.

This raises the risk of a flight from EUR risk heading into the close of the

week and that may be reflected in the EUR/USD rate so far today, which has

dropped below $1.22 for the first time since early January.