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Pre-SNB, Fed CHF Vol Premium Doubles G10 FX Average

CHF
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  • Overnight vols for CHF options have surged materially, with the pre-SNB risk premium showing just above 18 points today and the highest level in a year. The contract now captures both the SNB decision on Thursday, as well as today's Fed decision, dot plot and Summary of Economic Projections - justifying the vol risk premium that's double the average added across G10 FX.
  • An ATM overnight USD/CHF straddle now prices a 60 pip swing in the pair upon expiry - a move that would bring the 200-dma support into play in a negative reaction (0.8816) or the psychological handle resistance at 0.9000 on any positive market move in the pair.
  • Market pricing for the SNB decision remains split between a hold and a first 25bps cut of the cycle - CHF OIS currently prices ~9bps of easing for the March meeting, with a 25bps cut more than fully priced for June.
  • See our full SNB Preview here, in which most analysts surveyed call for no change in policy this quarter, however very few have ruled out a rate cut entirely: https://roar-assets-auto.rbl.ms/files/60395/SNBPre...
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  • Overnight vols for CHF options have surged materially, with the pre-SNB risk premium showing just above 18 points today and the highest level in a year. The contract now captures both the SNB decision on Thursday, as well as today's Fed decision, dot plot and Summary of Economic Projections - justifying the vol risk premium that's double the average added across G10 FX.
  • An ATM overnight USD/CHF straddle now prices a 60 pip swing in the pair upon expiry - a move that would bring the 200-dma support into play in a negative reaction (0.8816) or the psychological handle resistance at 0.9000 on any positive market move in the pair.
  • Market pricing for the SNB decision remains split between a hold and a first 25bps cut of the cycle - CHF OIS currently prices ~9bps of easing for the March meeting, with a 25bps cut more than fully priced for June.
  • See our full SNB Preview here, in which most analysts surveyed call for no change in policy this quarter, however very few have ruled out a rate cut entirely: https://roar-assets-auto.rbl.ms/files/60395/SNBPre...