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Vol Premium Seen Smaller into May CPI Report Relative to Past Two Months

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  • Overnight vols suitably bid ahead of the US CPI today, Fed rate decision tomorrow - Overnight EURUSD straddles now pricing a swing of just under 50 pips (relative to a ~15 pip swing at the beginning of this week).
  • Despite the creep higher in front-end USD vols, the gains are far more muted relative to previous inflation reports, with the same gauge reaching 13.5 points for April CPI (May 10th) and over 16 points for March CPI (April 12th). This may suggest options markets anticipate a more muted market response to the CPI print later today.
  • Spec USD positioning remains close to multi-month lows, per CFTC data, holding a small net long USD ~12k contracts as of June 6th - having stabilised just above the smallest net long position since mid-2021.

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