[...] latest jobs report, in which another rise in the unemployment rate could support the case of another RBA rate cut in the near-term. VIX Spike N
[…] latest jobs report, in which another rise in the unemployment rate could support the case of another RBA rate cut in the near-term.
VIX Spike Needed to Spur Currency Volatility
EURUSD : Softening US data and rising prospects of an imminent rate cut the Federal Reserve has seen option traders become the most bullish on the Euro since the beginning of 2018 with EURUSD reclaiming 1.13. Risk reversals have moved further into positive territory suggesting that demand for Euro calls is higher than puts. However, given that implied vols in the Euro are heading lower, this implies that any gains would most likely be gradual as opposed to a sharp rally. Alongside this, sizeable vanilla options around 1.1300-1.1360 could see price action somewhat muted in the absence of a fresh fundamental catalyst.
USDTRY : Eyes will be on the upcoming Turkish Central Bank rate decision, where the central bank is expected to maintain interest rates at current levels as authorities continue to fight steep inflation. While inflation on a yearly basis has ped 25% to 18.7%, the CBRT is expected to maintain its tightening bias in order to keep inflation spiking again. Consequently, while implied volatility in the Turkish Lira has eased alongside buyers of topside protection.
For a more in-depth analysis on FX, check out the Q 2 FX Forecast
– Written by Justin McQueen, Market Analyst