BUZZ-FX options wrap - FX warnings, CPI risk, JPY reversal, EUR 1.15

FX option implied volatility remains close to recent and long-term highs, signalling a clear warning against complacency in the face of potential FX volatility shocks.

The immediate risk stems from Wednesday's U.S. CPI data, reflected in the sharp rise in overnight implied volatility as expiry now includes the event.

EUR/USD is eyeing a key double top at 1.0937 (Nov 5-6), with gains above 1.0900 lifting 1-month implied volatility back to 9.0 and 1-year to 7.65. Demand for EUR call options persists, particularly for topside strikes in call spreads and knock-out structures, hinting at 1.1500 as a viable target in the coming months.

GBP/USD is still struggling to break above 1.3000, with subsequent implied volatility setbacks having since stalled - 1-month at 8.1 from 8.6.

AUD/USD implied volatility remains steady with 1-month in the low from mid 10's amid risk aversion and weaker levels.

USD/JPY implied volatility and JPY call over put premiums are just off recent and 2025 highs amid a some profit taking on downside structures as spot edges higher after a GPIF report. However, with stocks still falling and broader risk sentiment strained ahead of Wednesday's US CPI data - USD/JPY implied volatility remains well above its peers.

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

((Richard.Pace@Thomsonreuters.com))