FxWirePro: A bird’s eye-view on EUR bloc FX vols on eurozone PMIs

The publication of composite purchasing manager indices for the eurozone has been lackluster (Service PMIs are at 52.5 versus consensus 53.1 and previous flashes at 53.3 levels and Manufacturing PMIs are at 47.8 against consensus 48.1 levels.

European-bloc FX vol can pick up in a variety of ways – if the Euro catches up to the extended stretch of poor data by breaking below 1.10, if Trump turns his attention to tariffs on European autos after a successful China deal, or if the noisy run-up to the European elections in May reignites Italian stress.

Our FX macro portfolio is well prepared for these unfriendly outcomes via a suite of bearish Euro option structures instituted last week, but sub-6 3M ATM vols in EURUSD are not. 

We remain of the view that smaller, less liquid satellite European names like CEE and Scandinavian FX are better ways of playing a spike in Euro vol than EURUSD itself (the currency spread between Euro-bloc vs. EURUSD vols typically widens in stress). 

As a complement to directional Euro shorts, owning USDSEK – EURSEK vol spreads can be one carry-efficient way of positioning for this theme. Courtesy: JPM

Currency Strength Index: FxWirePro's hourly EUR spot index is showing -51 (which is bearish), while USD is flashing at 135 (which is highly bullish) while articulating at (10:24 GMT).

For more details on the index, please refer below weblink: http://www.fxwirepro.com/currencyindex