Stock Futures Dip as Investors Await Key Payrolls Data 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
Japan Inflation Expectations Rise as BOJ Rate Hike Timing Faces Uncertainty 
RBA Rate Hike Outlook: Impact on AUD/USD and ASX 200 
DOJ Ends Probe Into Fed Chair Jerome Powell, Boosting Kevin Warsh Confirmation Prospects 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
Bank of England Set to Hold Interest Rates as Inflation Risks and Iran War Impact Loom 
Bank of America Posts Strong Q4 2024 Results, Shares Rise 
ECB Rate Outlook: Ceasefire Eases Pressure but Hikes Still Expected in 2026 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
Global Markets React to Strong U.S. Jobs Data and Rising Yields 
2025 Market Outlook: Key January Events to Watch 
Bank of Japan's Ueda Flags Low Real Interest Rates as Key Factor in Rate Hike Timing 
US Gas Market Poised for Supercycle: Bernstein Analysts 
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
The Pound remains on the front foot, after a much stronger-than-expected confidence pickup in yesterday’s CBI survey. Attention will now turn to tomorrow’s PMI data which may prove pivotal in regards to January’s BoE rate decision.
Today’s ECB policy announcement is not expected to lead to any change in policy. Following the stimulus measures introduced late last year, the ECB is now on hold while it assesses developments. Indeed, there is a high probability that policy will be left unchanged all year. At her first post-policy meeting press conference in December, new ECB President Lagarde said that the downside risks to the economic outlook may now be less pronounced and that if further stimulus was warranted it may be better if it came from fiscal policy. The ECB will also today confirm that its comprehensive strategy review is underway. So far, the ECB has been reluctant to talk about what this will cover but indications are that the inflation target will be discussed as will any potential side effects of both negative interest rates and the asset purchase programme.
Hence, our defensive stance in EURGBP has been dictated by the receding global economic tide, but we cannot ignore that political risk has been an instrumental factor in these worse macro outturns. This warrants a tactical reduction in our defensive exposure but we uphold our hedging portfolios via 3-way straddles.
The passively skewed IVs of 3m tenors are well-balanced, indicating both upside and downside risks, more bids are observed for OTM call strikes up to 0.86 level and OTM put strikes upto 0.83 levels.
While EURGBP risk reversals of the existing bullish setup remain intact despite fresh bids for bearish risks. Below options strategy could be deployed amid the expected turbulent conditions. According to the OTC FX surface, 3-way options straddle versus ITM calls seem to be the most suitable strategy for EURGBP contemplating some OTC sentiments and geopolitical aspects.
Options Strategy: The strategy comprises of at the money +0.51 delta call and at the money -0.49 delta put options of 3m tenors, simultaneously, short (1%) ITM call of 1m tenors. The strategy could be executed at net debit but with a reduced trading cost.
Hence, on hedging as well as trading grounds, initiate above positions with a view of arresting potential FX risks on either side but slightly favoring short-term bearish risks.
Alternatively, on hedging grounds we advocated initiating directional hedges that comprised of shorts in EURGBP futures contracts of February’2020 delivery and simultaneously, longs in futures of April’2020 delivery, shorts have expired now as per desired moves. We wish to maintain long positions. Courtesy: Sentry, Saxo & Llyods
