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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.
OPTIONS
- As markets roll into September, the front-end of the G10 FX vol curve is seeing further support as contracts capture potential policy pivots from the Fed, ECB, SNB and BoE.
- Vols are further biased against the greenback, with EUR, GBP and JPY 1m risk reversals posting a Z-score north of 2 points in favour of USD puts. This is more extreme in the USD/CHF curve, in which 1m risk reversals cleared 1.5 points in favour of puts today for the first time since the onset of COVID in March 2020.
- This makes the USD weakness this month distinct from the USD-selling phase into end-Dec'23, which proved short-lived and was not accompanied by a significant leg lower in USD call vol.
- Back in December, front-end USD vols remained broadly inline with the rolling average, aiding the ~5% rally in the USD Index and wholly erasing two months of weakness.
Figure 1: G10 FX vols build bias in favour of USD puts over September
- Currency options trade rebounded yesterday after Monday's holiday-thinned trade, with over $100bln notional traded via the DTCC. The USD Index's fresh pullback low of 100.514 will have helped stimulate the decent hedging activity noted against MXN, NZD and ZAR relative to recent averages.
- Through the US open today, markets are somewhat quieter, however hotspots of hedging activity remain in HKD, CHF and KRW.
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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