S&P 500 Relies on Tech for Growth in Q4 2024, Says Barclays 
U.S. Stocks vs. Bonds: Are Diverging Valuations Signaling a Shift? 
Asia’s IPO Market Set for Strong Growth as China and India Drive Investor Diversification 
Ethereum Ignites: Fusaka Upgrade Unleashes 9× Scalability as ETH Holds Strong Above $3,100 – Bull Run Reloaded 
Airline Loyalty Programs Face New Uncertainty as Visa–Mastercard Fee Settlement Evolves 
Lithium Market Poised for Recovery Amid Supply Cuts and Rising Demand 
Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
Fed May Resume Rate Hikes: BofA Analysts Outline Key Scenarios 
Holiday Economic Questions: What Bank of America Says You Should Expect 
Goldman Predicts 50% Odds of 10% U.S. Tariff on Copper by Q1 Close 
Gold Prices Fall Amid Rate Jitters; Copper Steady as China Stimulus Eyed 
Europe Confronts Rising Competitive Pressure as China Accelerates Export-Led Growth 
FX vols have almost entirely retraced their peak-to-trough jump as the VIX spike of early February has subsided, but are entering March with a renewed bid under the cloud of trade tensions. Aside from the yen for which the direction of travel is clearer than elsewhere, most other USD pairs are subject to cross-currents of US twin deficits, a potentially more-hawkish-than-expected Fed, and negative trade-related headlines, hence it is unclear whether options will receive enough directional sponsorship from an unambiguous dollar trend to send implied vols spiralling higher as happened in January.
At the same time, a choppy range in the dollar should arrest the decline in realized volatility following the VIX shock, and VXY should remain in the ascendant track of its typical recovery pattern from cyclical troughs for the next 3-6 months (refer above chart). Net-net, the bar for vol selling is high in this climate, but we are not averse to selective RV constructs that take advantage of the cheapness of EUR/high-beta cross vols.
We also favor positioning for a muted dollar environment via soft short USD-correlation structures such as vanilla USD-JPY-NZD correlation triangles that net collects premium but with the hedge protection of a high-beta cross-yen leg. Given the historical precedent of de-coupling between reserve and commodity/carry currencies during trade conflicts.
Owning select EUR-and JPY cross vols that benefit from such a wedge is perhaps the cleanest theme at present; we are already positioned for this through GBPJPY – USDJPY and BRLJPY – USDJPY vega spreads, and add a soft, net premium-earning version of the same through a correlation triplet.
A more muted dollar environment should also tilt USD-correlations lower. Express a soft bearish USD corr lean via option triangles that sell USDJPY and NZDUSD puts hedged with long NZDJPY puts.
FxWirePro launches Absolute Return Managed Program. For more details, visit:
