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OPTIONS: Markets Isolate JPY, CAD, MXN, HUF as Most Sensitive into CPI

OPTIONS
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  • Hedging markets have isolated JPY and CAD as carrying the most risk premia across today's US CPI print, with overnight implied posting the most sizeable vol gains for these two currencies among their G10 peers.
  • Vol gains for CAD come as USD/CAD looks more comfortable above the early August highs and within just 10 pips of the key longer-term resistance at 1.3977, clearance above which puts the pair at the highest since 2020, proximity to which will be keeping vols elevated, and the currency sensitive.
  • Similarly for USD/JPY, BoJ policy and the FX approach of the Japanese authorities becomes key, with markets re-entering levels at which the Japanese authorities intervened in FX, particularly in light of the upgrade to FX language last week: adding the word "extremely" to the phrasing "We are watching developments [...] with an extremely high sense of urgency".
  • Across EMFX, HUF and MXN vols capture the largest overnight vol premium, suggesting continued volatility across USD/MXN and USD/HUF as they remain close to cycle highs. Full table here:
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  • Hedging markets have isolated JPY and CAD as carrying the most risk premia across today's US CPI print, with overnight implied posting the most sizeable vol gains for these two currencies among their G10 peers.
  • Vol gains for CAD come as USD/CAD looks more comfortable above the early August highs and within just 10 pips of the key longer-term resistance at 1.3977, clearance above which puts the pair at the highest since 2020, proximity to which will be keeping vols elevated, and the currency sensitive.
  • Similarly for USD/JPY, BoJ policy and the FX approach of the Japanese authorities becomes key, with markets re-entering levels at which the Japanese authorities intervened in FX, particularly in light of the upgrade to FX language last week: adding the word "extremely" to the phrasing "We are watching developments [...] with an extremely high sense of urgency".
  • Across EMFX, HUF and MXN vols capture the largest overnight vol premium, suggesting continued volatility across USD/MXN and USD/HUF as they remain close to cycle highs. Full table here: