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Softer CPI Has Little Impact on Options-Implied Ranges

GBP
  • While GBP/USD spot trades within range of next support at the Feb 5 low at 1.2519 after today's softer-than-expected CPI, options markets remain more subdued: GBP/USD put vol remains at cycle lows (7.17 points was printed for the 3m contract this week, the lowest since early 2022).
  • Subdued vols persist despite the 3m contract capturing a series of 'live' risk events - namely the Spring budget (Mar6), BoE decisions (Mar21, May9 + MPR) - not to mention several further iterations of CPI/jobs data.
  • This contains the options-implied range for GBP/USD over the next 3 months, assigning a 50% likelihood for the pair holding within 1.2283-1.2820 - a range that's persisted despite the downside surprise for UK, and upside surprise for US inflation this week. Consensus looks for 1.2600 over that time frame - little changed from current levels.

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