###POV: MARKETS FAR MORE WARY OVER......>

EURO-DOLLAR: ###POV: MARKETS FAR MORE WARY OVER ECB THAN FED

-EUR/USD options markets anticipate far larger price swings and market

volatility over Thursday's ECB meeting than they do at Wednesday's Fed

announcement. 1-week EUR/USD implied vols lurched higher by as much as 3 vol

points yesterday as the contract brought the ECB into view. In contrast, on

Wednesday, the contract rose a mere 0.7 vol points when capturing the Fed,

indicating traders see far more risk and volatility over the ECB event.

-As a result, the potential for disappointment on Thursday is large: EUR/USD

short-end risk reversals have been well bid on reports that the ECB could come

to a decision on APP as soon as Thursday. Consequently, the market may be

building in expectations of a hawkish ECB tilt and a bias for EUR longs. Any

lack of hawkish messaging would expose these positions and may weigh on the EUR

and short-end rates Thursday.

-While ECB speeches have hinted at action, there's no concrete expectation of an

end-date for asset purchases. Should this materialise, there's a risk that long

EUR positioning and upside EUR protection will be in greater demand.