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OPTIONS: Pre-NFP Vol Premiums Suggest FX Market Fallout Could Be Contained

OPTIONS
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  • Despite ballot boxes having opened, GBP vols markets show very little sign of interest in the election outcomes overnight, evident in the EUR/GBP overnight vol premium barely budging when capturing tomorrow's cut. With a significant Labour majority in parliament well priced in, sizeable FX moves on the election results are seen as a minimal risk.
  • Conversely, USD vols are bid despite the July 4th holidays, with overnight contracts capturing the June jobs report and potential implications for the Fed's September meeting.
  • MXN, BRL and GBP are posting vol premiums of just over 5 points apiece, which falls short of the prevailing levels before the other jobs prints this year, and could suggest a more muted reaction this month. USD/JPY breakevens, for example, price a ~60 pip swing into the Friday cut, vs. The 50-55 pip YTD average.
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  • Despite ballot boxes having opened, GBP vols markets show very little sign of interest in the election outcomes overnight, evident in the EUR/GBP overnight vol premium barely budging when capturing tomorrow's cut. With a significant Labour majority in parliament well priced in, sizeable FX moves on the election results are seen as a minimal risk.
  • Conversely, USD vols are bid despite the July 4th holidays, with overnight contracts capturing the June jobs report and potential implications for the Fed's September meeting.
  • MXN, BRL and GBP are posting vol premiums of just over 5 points apiece, which falls short of the prevailing levels before the other jobs prints this year, and could suggest a more muted reaction this month. USD/JPY breakevens, for example, price a ~60 pip swing into the Friday cut, vs. The 50-55 pip YTD average.