FX Options Insights 10/06/25
G10 FX option implied volatility remains subdued near recent lows following Friday's U.S. Non-Farm Payroll (NFP) data, reflecting a market lacking momentum and clear direction as it awaits further clarity on trade agreements and their economic implications. Wednesday's U.S. CPI inflation data is now factored into overnight expiry options, but the absence of a notable implied volatility premium suggests dealers expect minimal impact on realised volatility. Interestingly, the benchmark 1-month expiry implied volatility continues to face downward pressure this week, despite now encompassing the July 8 deadline for Donald Trump's U.S. tariff extension. The 1-month expiry implied volatility for major G10 FX pairs is trading at its lowest levels in a month, not far from the long-term lows observed before the U.S. reciprocal tariffs were announced on April 2. That announcement had previously jolted the USD and triggered heightened FX volatility in subsequent sessions.
This week, EUR/USD sees 10 billion euros in strikes expiring around the 1.1400 level, which could act as a key pivot point if FX consolidation persists due to hedging activity. GBP/USD declined after disappointing UK payroll data on Tuesday. Increased demand and premium for short-dated downside strikes and implied volatility suggest heightened hedging activity, reflecting concerns over potential deeper FX setbacks. Meanwhile, strong demand for topside strikes and new multi-year lows for downside-over-upside strikes in risk reversals indicate a growing bullish sentiment for AUD/USD.
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!