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OPTIONS: EUR Vol Still Sees French Election Risk; Hedges Favour ST CHF Stability

OPTIONS
  • Despite decent activity in spot around the weak PMIs this morning, currency hedging markets are more muted early Friday, with busier EUR, CHF and SGD markets countered by quieter JPY and CNY options trade. 
  • Meanwhile, EUR 3-week vols - capturing both the first (Jun30) and second (Jul7) round of French legislative election voting - remain elevated at either side of 7 points. While these contracts are off the post-announcement best levels, they still contribute to a considerable skew toward the front-end of the EUR curve. 
  • Risk reversals remains solidly skewed in favour of puts for EUR/USD. The 1m contract trades either side of -1.5 points and the lowest levels since Q3 '22. 
  • Following the SNB decision yesterday, demand for CHF options has picked up - particularly in USD/CHF, where demand for downside exposure is evident despite the rate cut yesterday. Solid trade in near-dated 0.89 puts have driven the skew - and favours a return toward, and below, yesterday pre-rate cut lows for the pair. 
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