As we approach US election day, market participants are increasingly pricing election risks, notably in the derivatives space, particularly within FX and equity markets.
The rise in implied vol across G10 indicates a heightened sensitivity to election outcomes, with EUR implieds near annual highs and a bias towards USD appreciation reflected in risk reversals.
In equity markets, the VIX remains above 20, suggesting market caution, but this is structurally due to it measuring 30-day implied vol during the election period.
Growing demand for puts over calls in G10 pairs implies an increasing sentiment leaning towards USD strength, relating to expectations of political developments.
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