EUR risk short-lived: The recent tightening of the spread is essentially due to the political risk premium in Europe, which is currently supporting EUR vols. Our central scenario sees Marine Le Pen failing to win the French presidential election and a euro bounce accompanied by a deflating of the EUR volatility premium.
The G10 convergence trade: long EURAUD
The AUD has performed the most and the EUR the least against the USD since the start of the year: long EURAUD is a natural G10 convergence trade.
AUD strength is at risk, as the surge in metal prices may not be sustainable.
The EUR could take a breather if French pre-election uncertainty has passed its peak.
We like selling the EURAUD high vol risk premium conditionally on a bullish pay-off.
Trade a tactical bounce via a 2m zero cost ladder strikes 1.38/1.39/1.42.
Recommendation: Buy EURAUD 2m ladder strikes 1.38/1.39/1.42, zero cost (indicative offer, spot ref: 1.3778) Trade risks: unlimited above 1.43.
The ladder structure is a standard call spread strikes 1.38/1.39 fully financed by a call strike 1.42. Investors, therefore, face unlimited risk if EURAUD trades above 1.43 at the 2m expiry and may have to delta-hedge the position.


European Stocks Rally on Chinese Growth and Mining Merger Speculation
2025 Market Outlook: Key January Events to Watch
Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close
How Donald Trump has changed the way diplomacy is done
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty
China’s Growth Faces Structural Challenges Amid Doubts Over Data
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms
Bank of America Posts Strong Q4 2024 Results, Shares Rise
Trump’s "Shock and Awe" Agenda: Executive Orders from Day One 



