The post Options signal pre-war regime – Commerzbank appeared on BitcoinEthereumNews.com. Commerzbank’s Michael Pfister analyses EUR/USD options, noting that sinceThe post Options signal pre-war regime – Commerzbank appeared on BitcoinEthereumNews.com. Commerzbank’s Michael Pfister analyses EUR/USD options, noting that since

Options signal pre-war regime – Commerzbank

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Commerzbank’s Michael Pfister analyses EUR/USD options, noting that since the Iran conflict the relationship between implied volatility and risk reversals has reverted towards its pre–”Liberation Day” pattern. He argues there are fundamental reasons for a weaker Euro versus the Dollar and that markets may be reverting to a long-standing equilibrium where the US Dollar retains safe-haven characteristics.

Options market and haven dynamics

“Previously, higher implied volatility was often accompanied by greater demand for hedges against USD strength (i.e., more negative EUR-USD risk reversals).”

“Since the start of the Iran conflict, however, the EUR-USD relationship also seems to have faltered.”

“On the one hand, this is because there are good reasons for a weaker euro compared to the USD. It is therefore only logical to want to hedge against a stronger US dollar.”

“On the other hand, I also suspect that the market fundamentally tends to revert to its former equilibrium. By this, I mean: The safe-haven status is quite cemented, and it takes repeated disruptions before the market deviates from it in the long term.”

“Over the course of April, this previously long-standing relationship shifted, and this was by no means limited to EUR-USD, even though the shift did not last as long for other currency pairs “

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)

Source: https://www.fxstreet.com/news/eur-usd-options-signal-pre-war-regime-commerzbank-202603180826

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