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Euro Traders Gear Up for Turbulence Around ECB, BOE Meetings
By Vassilis Karamanis
(Bloomberg) — Front-end volatility in the major currencies turns modestly bid Wednesday ahead of the meetings by the European Central Bank and the Bank of England as well as the U.S. payrolls report.
One-day hedging costs in the euro rise, though in line with the roll; in euro-dollar, the gauge rises by as much as 5 vols to touch 11.50 vols, the highest reading since the December meetings by the central banks
It is the second highest reading since March 2021 and gives a breakeven of 55 dollar pips with spot at 1.1288; one-week risk reversals in the euro rose Tuesday by the most since Nov. 26 as investors hedge against a hawkish tilt by the ECB and following overstretched levels that called for a correction
One-day in cable touches 11.11 vols, below the January high of 11.23 vols; in euro-sterling, the earlier high at 11.25% was a level unseen since mid-December
Implied volatility for short-term structures is higher also as an expression of position unwinds that come after month-end flows last week boosted the greenback