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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.
FOREX
- Front-end implied USD vols are gaining ahead of the back-loaded week for risk events, with the Fed, ECB and BoJ decisions supplying the near-term uncertainty. The added vol premium is inconsistent across G10, however, with SEK, EUR and JPY vols among the largest gainers in G10, while ZAR and PLN look the most exposed across emerging markets.
- As such, the break-even on a USD/SEK overnight straddle has risen to 884 pips or 0.8%, from ~370 pips or 0.35% at the beginning of the week, while USD/ZAR overnight vols are priced at their highest since late May, which marked the ZAR’s decline to record lows against the USD.
- EUR vols are similarly bid, with overnight adding over 8 points this week, however the contract also captures the fallout of the ECB decision and Lagarde’s press conference due tomorrow, with JPY vols under a similar influence ahead of the BoJ.
- USD/JPY risk reversals have traded under pressure this week, and are now signaling the highest cost to hedge downside in the pair over a one-month horizon since late April.
Figure 1: SEK, ZAR show the largest vol premiums added ahead of the Fed
MNI London Bureau | +44 203-865-3809 | edward.hardy@marketnews.com
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.
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