### POV: CURRENCY MARKETS SEE ECB MEETING A....>

EURO: ### POV: CURRENCY MARKETS SEE ECB MEETING A NON-EVENT, BIGGER RISKS AT

PLAY

-One-week implied vols for EUR/USD sit almost exactly inline with the 2018

average, although the contract added 0.9 vol points last Thursday when first

capturing the ECB rate decision and presser. The move supports an

implied/realised vol premium of around 0.5-0.6 points heading into the meeting.

-The added risk premium for GBP assets is clear: while EUR/GBP and EUR/USD 1w

implied vols aren't too dissimilar (6.9600 vs. 7.2150), the gap really opens up

further out. EUR/GBP 3m implied vols trade 1.3 vol points above the parallel

EUR/USD measure, the largest spread between the two since November 2017.

-This 'Brexit premium' reflects the continued political uncertainty dogging the

GBP. Paddy Power as recently as yesterday were offering odds of 2/1 on a Tory

leadership contest taking place by the end of 2018 and the odds continue to

shorten (the same bet was 7/2 last week). However, reports this week suggest the

PM's support is stronger (or, opposition is weaker) than seen previously, with

rival factions within the party withdrawing amendment challenges in parliament.