💶EUR/USD Sees Lowest O/N Volatility Into ECB: Cable FX Macro

• The options market is heading into the ECB with EUR/USD one day volatility at the lowest reading over the course of last year. O/N vol stands at 7.322%, the April meeting had seen the tenor above 10.0%

• ECB policymakers have signaled the central bank is ready to reduce interest rates, however, traders do not expect ranges to be wide. This could be due to a potential data dependency approach from Lagarde while swap traders have brought Fed rate cut bets forward

• EUR/USD is not known for recording abnormal moves during ECB decisions. In fact, the cross is more sensitive to FOMC rate decisions over the course of last year

• 1w tenors now cover ECB rate decision, U.S. CPI, and the FOMC rate decision. Risk reversals show EUR/USD puts holding a premium of 5bps to calls, this is below the 1y average of 13bps