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OPTIONS: Vols Highlight Sensitivity of Growth-Proxy FX to CB Deluge

OPTIONS
  • Currency options markets quite clearly show the central-bank inspired risk premium across G10 FX this week, with GBP, BRL, JPY understandably printing the greatest vol premium headed into their respective CB rate decisions (JPY overnight, BRL just after the Fed, GBP tomorrow), however markets have also isolated risk- and growth-proxy currencies headed into this volatile week.
  • MXN vols have surged, with overnight implied clearing 26 points for only the second time this year - MXN stands as the most liquid and tradeable Latam currency ahead of three separate regional rate decisions (BRL, COP and CLP), all of which carry a live risk of a policy change. It's likely MXN is acting as a proxy for this risk for international investors.
  • AUD, NZD and NOK vols see notable support as growth- and commodity-tied currencies - the soft Australian CPI data will be adding to support here, while the bounce in Brent prices will be aiding NOK overnights toward 20 points - while also capturing tomorrow's PMI print.
  • Table here:

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