So how are currency markets geared ahead.....>

DOLLAR: So how are currency markets geared ahead of the FOMC?

- Overnight implied vols across both EUR/USD and USD/JPY are suitably bid, with

EUR contracts also benefiting from the imminent ECB decision Thursday. EUR/USD

o/n vols today hit one-month highs at 14.5 points and USD/JPY at around 10

points, highest since Apr'20. This suggests options traders are wary of

volatility - but not to the same extent as during the asset market routs in late

March.

- On a net basis, CFTC CoT positioning data shows the net long position has

rebuilt slightly after hitting the 18-month low in mid-March that came alongside

the sharp drop in open interest. CFTC data shows that the (modest) bounce in

longs has slightly outstripped rising interest in shorts over the past few

weeks.

- At the very front-end of the vol surface, both USD/JPY and EUR/USD SMILE

curves have flattened out materially since the end of March, but both curves

remain skewed (but now, only slightly) toward a USD call bias.