Sign up
Log in
BUZZ-FX options wrap - Focus on USD puts for post jobs report FX clues
Share
Listen to the news
BUZZ-FX options wrap - Focus on USD puts for post jobs report FX clues

The U.S. jobs FX volatility risk premium reached 2024 highs before Friday's data to highlight the importance of these to the Federal Reserve's rate path. Higher premiums and demand for USD puts appeared justified by more USD weakness after a lower-than-expected payrolls report.

However, broader FX option implied volatility is lower as those event risk premiums are pared and the USD retreats from its worst levels. USD/JPY one-month implied volatility traded at 13.75 on Thursday from 11.9 on Monday and ends the week at 12.6. AUD/USD one-month implied volatility has almost completed a round trip from 9.15 to 10.0, while EUR/USD one-month is back at 5.8 from highs at 6.35 on Thursday.

EUR/USD sub one-month expiry risk reversals flipped back in favour of USD puts/EUR calls before the jobs data, with demand for shorter dated expiry topside strikes above 1.1200. If that premium/demand falters week, it could signal a lack of expectations for further short-term FX gains, especially if Thursday's expected 25 bps European Central Bank rate cut comes with a dovish tone.

FX options had been covering the risk of USD/JPY breaking 140.00 barriers sooner than initially thought, while one-month USD/JPY risk reversals increased premiums for downside over upside strikes from 1.6 to 2.4 - both trades and prices are worth watching for any signs of this demand faltering week.

Focus turns to Wednesday's U.S. CPI data, which is the last significant data before the Sept. 18 U.S. Federal Reserve policy decision, where the probability of a 50 bps cut currently stands at 37%.


For more click on FXBUZ


(Richard Pace is a Reuters market analyst. The views expressed are his own)

((Richard.Pace@Thomsonreuters.com))

Disclaimer:This article represents the opinion of the author only. It does not represent the opinion of Webull, nor should it be viewed as an indication that Webull either agrees with or confirms the truthfulness or accuracy of the information. It should not be considered as investment advice from Webull or anyone else, nor should it be used as the basis of any investment decision.
What's Trending
No content on the Webull website shall be considered a recommendation or solicitation for the purchase or sale of securities, options or other investment products. All information and data on the website is for reference only and no historical data shall be considered as the basis for judging future trends.