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Muted Vol Premiums Suggest Markets Expect Contained NFP Reaction

OPTIONS
  • G10 overnight implied volatility markets have added a relatively small risk premium ahead of today’s US jobs report, potentially suggesting hedging markets see only a muted market response relative to the NFP reports posted so far in 2024.
  • AUD/USD overnight vols were bid up to ~13.5 points yesterday, shy of the prevailing levels ahead of the March 8th (15.3 points), February 2nd (16.7 points) and January 5th (17.2 points), but still representing the most sizeable pre-payrolls vol premium across G10.
  • An overnight ATM AUD/USD straddle struck to expire after payrolls today implies a ~35 pip swing in currency pair – a relatively more muted break-even swing that recent NFP iterations.
  • This should keep the closer strikes rolling off at today’s NY cut in play – most notably EUR/USD: $1.0800(E1.6bln), $1.0870-80(E652mln) and USD/CAD: C$1.3500-10($1.3bln)
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