OPTIONS
- Implied FX vols took an expected leg lower in the second half of this week following the conclusion of the elections, but the three-month tenor remains of particular note as it captures the first few weeks of the new Trump administration. While Trump is unlikely to pull the trigger on major policy switches so soon into his Presidency, expectations and messaging on policy are likely to be set, with a full cabinet in place.
- As a result, vols for currencies seen as particularly exposed to tariff risk and global trade conditions remain well elevated over the three-month maturity - with EUR, GBP, JPY, CNY, MXN and BRL 3m vols still comfortably north of the 12m upper quartile.
- The stickiness in vols for some currencies also exposes those that are seen as more insulated from an incoming Trump administration, with CHF, NOK, SEK and, although to a lesser extent, NZD normalizing swiftly off highs.
Figure 1: Post-election vol normalization proves stickier for some
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