OPTIONS: Firm Demand for EUR Upside via Options, Solid Interest in $1.10 Strikes
Mar-05 10:14
Not just EUR spot markets that are gaining well early Wednesday, with front-end EUR implied vols surging on today's rally, putting the one-week clear of 11 points. This is still shy of the year's best levels (triggered by early February tariff volatility and Trump's inauguration), but holds 2.5 points clear of the YTD average as markets rush to price in near-term vol and the prospect of a higher EUR.
- Topside demand is clear to see: 1m EUR/USD risk reversals are now broadly flat, erasing the put premium that had dominated the market since late September and accompanied the USD Index rally off September lows. As a result, the rush of EUR/USD parity options pricing that became a notable market theme at the turn of the year has all but concluded, with markets now pricing just 0.3% options-implied probability of a touch of 1.00 by end-Q1, having traded as high as 28% just a month ago.
- No surprise then to see upside EUR/USD structures in firm demand today: over €11.5bln in calls have crossed the DTCC just this morning (that's near €3 in calls for every €1 in puts), with over €1bln call notional crossing at both the 1.08 and 1.10 strikes, making for some of the firmest upside EUR demand of the year so far.
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FOREX: CAD Sinks to Multi-Decade Lows on Tariff Hammer
Feb-03 10:10
- Intraday vol and headline risk picked up over the weekend, as Trump set in place to invoke an emergency in order to install 25% tariffs on Canadian and Mexican imports - effective from 0001ET on Tuesday. This leaves calls with the Canadian and Mexican leaders today (a call with Trudeau already set for Monday "morning") as a final opportunity at which to delay or lessen the impact of trade levies.
- USD/CAD gapped notably higher at the open, tipping the rate to touch a high of 1.4793 and the highest level since 2003. The sharper moves for USD/CAD bring >$800mln of option expiries at C$1.4895 on Wednesday into play but, more notably, it's the ~$3bln set to roll off between C$1.4740-1.4800 that should draw attention. A sizeable proportion of that expiry slate is made up of calls, and could keep prices supported across the week and through the dual US/Canadian jobs reports set for Friday.
- Give the deteriorating trade backdrop and 10% tariff threat also levied against China, growth-proxies and risk sensitive currencies are faring the worst off, as AUD/USD slippage puts the pair at a new cycle low. The $0.6088 print marks a new post-COVID low and isolates $0.6099 as key at the close - that level marks the 76.4% retracement of the rally off 2020 lows.
- Headline risk remains high, with much market focus on calls between the White House and Canada & Mexico. Data releases include the ISM Manufacturing print for January - seen keeping pace with the December reading to broadly mimic the data patterns seen in the MNI Chicago Business Barometer print from Friday. Fed's Musalem and Bostic are the central bank speakers of note.
EURIBOR: EURIBOR FIX - 03/02/25
Feb-03 10:07
Source: EMMI/Bloomberg
- EUR001W 2.7870 -0.0140
- EUR001M 2.6440 -0.0160
- EUR003M 2.5620 -0.0270
- EUR006M 2.5360 -0.0540
- EUR012M 2.4360 -0.0830
MNI: ITALY JAN FLASH HICP -0.7% M/M, +1.7% Y/Y
Feb-03 10:00
- MNI: ITALY JAN FLASH HICP -0.7% M/M, +1.7% Y/Y
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