FOREX: FX OPTION EXPIRY
Dec-05 09:28
Of note:
EURUSD 7.55bn between 1.0500/1.0600.
USDCNY ~1bn at 7.2500.
EURUSD 1.95bn at 1.0500 (fri).
EURUSD 1.26bn at 1.0500 (tue).
EURUSD 1.04bn at 1.0500 (wed).
- EURUSD: 1.0500 (1.02bn), 1.0505 (651mln), 1.0525 (1.09bn), 1.0535 (467mln), 1.0550 (1.08bn), 1.0560 (808mln), 1.0565 (939mln), 1.0580 (708mln), 1.0600 (782mln).
- GBPUSD: 1.2750 (558mln).
- USDJPY: 150.00 (731mln).
- USDCAD: 1.4030 (300mln), 1.4050 (220mln).
- AUDUSD: 0.6440 (551mln), 0.6445 (276mln).
- USDCNY: 7.2500 (955mln).
- EURSEK: 11.56 (415mln).
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Historical bullets
RIKSBANK: MNI Riksbank Preview Nov '24: Consensus Converges On 50bp Cut
Nov-05 09:24
EXECUTIVE SUMMARY
- A string of soft domestic activity data has shifted consensus towards a 50bp Riksbank cut in November to 2.75%, with markets tilted heavily towards that outcome.
- The door was opened to a 50bp cut in the September policy statement, which noted that rates would likely be cut in November and December “if the outlook for inflation and economic activity remains unchanged”, with a 50bp cut “possible at one of these meetings”.
- We think there is enough of a case for a 50bp cut to be delivered. The inflation outlook continues to appear consistent with the Riksbank’s 2% target, and growth concerns remain prevalent both domestically and in the Eurozone.
- The weak SEK presents the obvious case for a more cautious 25bp cut, which would be the most hawkish scenario for markets. Of the 16 analyst previews we have seen, only 1 looks for such a move.
FOR THE FULL PUBLICATION, SEE HERE.
OPTIONS: Election Impact Clear to See as USD/MXN Vols Surge to Record Levels
Nov-05 09:11
- Overnight FX options contracts now capture the immediate outcome of the election, and the impact is clear to see - USD vols are well bid, with the currencies seen as most exposed printing a considerable risk premia.
- As a result, USD/MXN overnight implied has cleared 100 points - that's an all-time high for the contract (other notable prints: 95 points mid-COVID, 96 points on Trump's '16 election and ~100 points in the '08 GFC). This implies a ~4% swing in USD/MXN on the results, and an implied range of approximately 19.35 - 21.05.
- It's not just USD vols that are being marked higher - haven currency vols including CHF and JPY are bid, meaning hedging markets are capturing potential fallout outside of the greenback. EUR/CHF and GBP/JPY overnight vols have added 6 points and 10 points respectively.
BONDS: Off Lows In Low Conviction Trade
Nov-05 09:11
Bonds recover from session lows. TY and Bund futures failed to test yesterday’s lows during the early London selling, while gilt bears failed to get anywhere near testing key support identified in earlier bullets.
- Moves remain low conviction at this stage, ahead of this week’s tier 1 event risks.
- Headline flow remains light, with background factors (also identified in earlier bullets) seemingly driving things early today.
- Parallel shifts on German and UK curves, yields ~2bp higher.
- U.S. curve a little steeper, yields flat to 2bp higher.
- EGBs are flat to 1bp wider vs. Bunds.
