FX options wrap - Looming event risks and FX expectations
Sept 10 (Reuters) -Implied volatility has been on the back foot as FX volatility risk premiums were priced out in the wake of Friday's mixed U.S. jobs data, which left FX in familiar ranges. However, Wednesday's U.S. CPI data and a host of major G10 central bank policy announcements are limiting potentially deeper declines.
Overnight expiry options now include Tuesday's televised debate between U.S. presidential candidates Kamala Harris and Donald Trump, and Wednesday's U.S. CPI data. However, a limited implied volatility increase in these options suggests a minimal FX reaction to either event.
Huge FX option strike expiries between 1.1000-1.1100 may continue to limit EUR/USD volatility through the Sept. 18 U.S. Federal Reserve policy announcement if Thursday's European Central Bank decision fails to excite.
Traders are still thought be long JPY via spot and options, with 140.00 barriers remaining a key USD/JPY target. Risk reversals are off highs but retain a solid JPY call/USD put premium.
GBP/USD price action shows a market wary of spot setbacks and limited upside potential, with sub 1-month risk reversals back in favour of GBP puts.
AUD/USD 1-month implied volatility settles in the middle of a 9.0/10.0 range and can offer potential value when compared to 1-month historic volatility at 9.8.
For more click on FXBUZ
AUD/USD 1-month implied vs historic/past realised volatility https://tmsnrt.rs/4gcULIJ
Overnight expiry FXO implied volatility https://tmsnrt.rs/4d5DYV4
1-month expiry FXO implied volatility https://tmsnrt.rs/3z2BTvj
(Richard Pace is a Reuters market analyst. The views expressed are his own)
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